The Reminger Report: Emerging Technologies

Legal Claims in the Ridesharing Context

May 12, 2021 Reminger Co., LPA Season 1 Episode 4
The Reminger Report: Emerging Technologies
Legal Claims in the Ridesharing Context
Show Notes Transcript

In the final part of our Intro to Ridesharing series, Zachary Pyers and Kenton Steele review the potential legal claims that face the ridesharing industry, arising from driver classification issues, regulatory compliance, and more.

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ZBP

            On today’s podcast, we’ll begin our discussion relating to driver classification as worker classifications and the legal claims that arise out of ridesharing accidents.  As we begin our discussion, Kenton, let me open it and ask you, what are the legal issues that can arise in the context of ridesharing?

 

KHS

            Well, Zach, there are, of course, a variety of legal issues that can come up, and I will say for the most part, the large, large majority of these issues stem from how the relationship between the ridesharing company and the driver is defined.  That is the worker classification question, and under that broad category of worker classification issues, there are two primary areas of law where questions can arise.  The first is employment law, and that really touches on what employment classification drivers fall into for the purposes of state and federal employment law which can, of course, bear on what benefits drivers are entitled to, whether or not drivers are entitled to an  hourly minimum wage as they would be if they were classified as employees rather than independent contractors, and that’s an issue that we will explore in greater detail in later episodes of the podcast, those employment classification issues.  The other area where issues can arise is tort law.  In tort law, the question of worker or driver classification is really tied to how responsibility for the cost of accidents is going to be split up between the driver and the ridesharing company and their respective insurance companies, so those are really the two largest categories of the issues that arise in the context of ridesharing.

 

ZBP

            Now, Kenton, you touched on the topic of worker classification.  What do you mean when you use the term “worker classification?”

 

 

KHS

            So, the question of worker classification is really sort of this dichotomy that exists between the two types of workers that are recognized under legal standards, the first being employees and the second being independent contractors.  This may be a distinction that some listeners are familiar with, but just for the purposes of clarity, I’ll give a brief explanation of the difference between independent contractors and employees.  In an employee/employer relationship, the employer has a greater degree of control over the work that is done by the worker, the hired party.  The employer is free to give instructions not only on what to do but how to accomplish the task.  By contrast, independent contractors, there is a lower degree of control exerted over the worker by the hiring party.  In simplest terms, in an independent contractor relationship, the hiring party is free to give the independent contractor work to do but is not able to specifically set out how that job is to be accomplished.  They’re given a task but not restrictions on how the task is done, so in this context of worker classification issues, you may already be able to tell that the question of control is really the primary factor in determining whether or not a worker is an independent contractor or an employee.  Now, it’s very easy to say, well the primary question is how much control does the hiring party have, but when you actually put that question underneath a microscope and look at it, just saying that the issue is control doesn’t really tell you anything, and as a result of that, there are a lot of different tests that have been created to address the question of worker classification.  There are some tests that apply in the employment law context that are very limited where the bar is very low to establish that an employment relationship exists, and there are other sort of more strenuous tests that typically apply in the tort liability context where a lot of different factors are considered, and the goal of all of those factors is to determine whether or not control exists.  So as we go through these other issues, that question of how much control is retained by the hiring party is sort of the primary or central factor to be considered when you’re talking about the question of worker classification.

 

ZBP

            Kenton, when we talk about the ridesharing companies, what positions have you seen them take with respect to how the drivers are classified?

 

KHS

            Yeah, on this point, the issue of driver classification has, of course, come up in the last 10 to 15 years, and in large part, we’ve seen it arise in the employment law context, and there have been some lawsuits filed by drivers as class actions against ridesharing companies saying that they are misclassified, and in those lawsuits, we are able to see what positions the ridesharing companies have taken as to how drivers should be classified.  In these arguments, predictably, the ridesharing companies have taken the position that drivers are independent contractors.  Now that’s not something that they only asserted in the lawsuit; that’s consistently been the position of ridesharing companies is that drivers are independent contractors, and as part of that argument, what the ridesharing companies have really emphasized is that drivers have a tremendous amount of flexibility and control over when they work, how they work, and that lack of control by the ridesharing company, the freedom that’s afforded to drivers to make their own decisions about when they’re gong to log on and accept rides and when they’re going to stop accepting rides, that that flexibility puts the drivers into the category of independent contractors.  The other argument that ridesharing companies have made is that they’re not really a transportation company at all, that the role of ridesharing companies is really that of a facilitator, that they’re a technology company that allows drivers to pair with riders but that those drivers are not under the control of the ridesharing companies.  In making this argument, what the ridesharing companies have put forward is that they are more like a phone book or like eBay, where if you’re a person who needs a ride, you can use their app to find someone else who is offering the service of providing transportation, and in this way, the ridesharing companies are seeking to distance themselves from the transportation aspect of their operation, and really what they’re saying is, we’re not a transportation company, we’re a technology company that is used to facilitate pairing drivers with riders.  We should not be held to the requirements of being a transportation company.  Now, courts were not receptive to these arguments.  These arguments were very quickly rejected by a number of courts that heard them.  One court in particular just came right out and said, that’s obviously wrong.  And so while there wasn’t a full and final decision there, courts were not receptive to this argument of, hey, we’re more like eBay than a taxi company; hey, we’re just a facilitator.  Those arguments were very quickly rejected by the courts that heard them.

 

ZBP

            Now you mentioned that the courts have not been receptive to this argument that drivers are independent contractors.  Does that mean that the drivers are then classified as employees?

 

KHS

            That’s a great question, Zach, and the answer to the question is not necessarily, and there are two reasons for that answer.  One is, we mentioned there are sort of two different categories of issues where we’re talking about worker classification.  One is in the employment context; one is in the tort context.  These decisions were made in the employment context, and as I mentioned, they were not full and final decisions.  They were really just a preliminary rejection of the arguments that, in this case, Uber and Lyft were making.  Those cases ultimately settled, so those decisions are not binding throughout the nation.  The other reason that those decisions are not conclusive on this question, even in the employment context, is that in the time since those decisions, which are coming up on being five, seven years old, a number of jurisdictions at the state level have enacted regulations or statutes that really define what drivers are, whether or not drivers are going to be entitled to certain benefits such as Workers’ Compensation or an hourly minimum wage, and under those classifications, many times, the drivers are not employees, they are independent contractors by definition.  And so that is why, for the employment side, it is not conclusive that drivers are employees.  Then turning to the tort side, the tests that those courts were applying were not the same tests that apply in a tort context, and so there is some value to those decisions when you’re talking about classification of drivers for the purposes of allocating liability, but they are by no means conclusive.

 

ZBP

            Noe one of the questions that I always like asking when we’re discussing these topics is, why is it important?  And so, when we talk about driver classification, why is it relevant to us understanding who is responsible when a ridesharing driver is involved in a crash?

 

KHS

            Yeah, and the reason that this question is so important when we’re talking about allocating responsibility for crashes, who bears the risk of loss, a lot of the importance there ties back to a concept, a legal concept of vicarious liability.  Now, what vicarious liability means is that one party is responsible for the actions of another party even though they’ve done nothing wrong themselves.  Now, the most common form of this vicarious liability that most people may be familiar with is respondeat superior.  Now, under that doctrine of respondeat superior, an employer is, by default, liable for the torts committed by their employees when the employee is within the course and scope of their job, so if drivers are classified as employees and a driver is involved in a crash where they’re at fault and they’re within the course and scope of driving, the ridesharing company is, by default, liable for the injuries caused in that crash.  That’s why this question of worker classification is so important in that tort context because if it is the other way, if drivers are independent contractors, then there is no respondeat superior that automatically makes the ridesharing company liable for forts committed by drivers.

 

ZBP

            Are there other theories that can result in a ridesharing company being liable for the injuries caused by the driver other than what you were just kind of outlining to us on the respondeat superior aspect?

 

KHS

            Yeah, absolutely.  So, when we’re talking about what liability do ridesharing companies have, the most direct route is if a plaintiff injured by a ridesharing driver in an accident, the most direct route is for them to say, the driver is an employee and so under the doctrine of respondeat superior, the company is liable for the injuries caused by the driver, but that is by no means the only type of claim or the only way that liability can exist for the ridesharing company.  We talked about vicarious liability, and that’s where the ridesharing company is being held liable for something they didn’t do; it’s something their driver did.  

 

But there are also direct liability claims that can be asserted against a ridesharing company in the event a crash occurs.  Now some of these direct liability claims are very fact-specific, but they can come up in many instances, and some of these claims are what we have seen form the basis of claims asserted against ridesharing companies.  So for instance, one of the types of claims is basically negligent hiring and retention, and you may be saying, how can there be a negligent hiring claim if it’s only an independent contractor, but in most jurisdictions, it is possible to negligently hire an independent contractor to do a job.  In that type of claim, what is at issue is whether or not the ridesharing company exercised due care or did their due diligence when they were hiring a driver in the process of determining whether or not the ridesharing driver was qualified for the job, and the primary focus here is often on the scope and depth of the background check that the ridesharing company performs on their drivers.  

 

We’ve seen claims come up where ridesharing companies were sued because drivers were allowed to operate on behalf of a ridesharing company despite the fact that they had criminal convictions for violent crimes, and those drivers then assaulted a passenger in the future.  The argument there is that the ridesharing company should have been aware of the risk created by that driver being allowed to offer rides that then materialized.  Other types of claims that can exist have to do with whether or not the ridesharing company did an adequate job of making sure that the driver’s vehicle was safe.  Part of the process of becoming a ridesharing driver is having the sort of minimum safety check run on the vehicle that the driver is going to use.  Now, the problem here is that it’s unclear to what extent these vehicle safety checks are ongoing, so a driver’s vehicle may be perfectly safe at the time that they complete the initial check, but over the following months or a year, the vehicle may fall out of compliance.  An issue may arise with the brakes or the seatbelts may not work; the airbags may be faulty; and then in that case, if the ridesharing company continues to allow that driver to operate in an unsafe vehicle, you have a question of whether or not there was a lack of due care in the retention of that driver allowing them to continue to operate.  

 

There are also some additional theories that are more jurisdiction specific, one of those being common carrier liability.  A common carrier is an entity that transports goods or passengers in regular routes for a set rate.  There is a higher duty of care that almost reaches strict liability in some instances for common carriers.  There’s a heightened standard to protect passengers, basically, and this duty cannot be delegated, meaning that if ridesharing companies are deemed to be a common carrier, they cannot delegate the duty that they owe to an independent contractor.  Under this type of standard, it’s clear to see how a ridesharing company could be subject to a direct liability claim, but again, getting back to changes in laws and regulations, there are some states, Florida for instance, that included in their initial round of ridesharing statutes, in their first round of ridesharing regulations, they specifically excluded ridesharing companies from the definition of common carriers.  Now, in addition to the states that have passed that type of requirement or that type of statute, there are other states that have completely done away with common carrier liability at all.  Whether or not it exists for ridesharing companies or any other type of common carrier, that claim simply is not recognized in the jurisdiction any longer, so as you can see, this is a very fact-dependent analysis.  

 

Each case is going to be slightly different depending on what facts are present with respect to the driver, the driver’s vehicle, what jurisdiction the crash occurs in, but the main takeaway here is that the question of liability for ridesharing companies is not as simple as, are the drivers employees or are the drivers independent contractors.

 

ZBP

            Great.  Thanks, Kenton.  And thank you for joining us today on the Reminger Report Podcast on Emerging Technologies.  Join us next time when we begin our discussion in a next series discussing ridesharing regulation.