“Drivers for Uber and Lyft won a key victory on Tuesday in their continuing effort to be treated like other workers when a federal judge in New York ruled that the state must promptly begin paying them unemployment benefits.
Many drivers have waged a long legal and political battle with the companies over their employment status. Uber and Lyft have maintained that drivers are independent contractors who are not entitled to standard employment protections, such as a minimum wage, overtime pay and unemployment insurance.
The companies have gone to elaborate lengths to prosecute this argument, including spending tens of millions of dollars on a ballot measure that would exempt their drivers from a California law that effectively classifies them as employees.
In her ruling, Judge LaShann DeArcy Hall appeared to come down firmly on the side of drivers in this broader debate, citing “an avoidable and inexcusable delay in the payment of unemployment insurance.”
The ruling resulted from a lawsuit filed in late May by drivers and an advocacy group called the New York Taxi Workers Alliance, who argued that the state was taking months to pay unemployed drivers while typically processing benefits for other workers in two to three weeks.
Although the lawsuit was filed against the state rather than Uber and Lyft, the judge called out the companies for extensive delay tactics that had made it difficult for drivers to receive the benefits they are owed.
Under the ruling, the state Department of Labor has seven days to convene and train a “work group” of several dozen staff members who will identify backlogged claims by drivers who have sought “reconsideration” after being told that they were ineligible, and take the necessary steps to pay them promptly. The state has 45 days to resolve this backlog.
Bhairavi Desai, executive director of the taxi workers’ group, said thousands of drivers were in this position. The judge gave the state 14 days to report back on the number.
Going forward, the Department of Labor must perform weekly queries to identify eligible claims by drivers who are currently denied prompt payment of their benefits so they can receive them quickly.
The ruling was a preliminary injunction, meaning the court was sufficiently persuaded by the drivers’ arguments and the urgency of the situation to require the state to accelerate the payments while the case is being litigated. The state can appeal the preliminary injunction to a higher court, and the court’s decision at the end of the trial could also reverse the preliminary decision, though that is unlikely.
“We are closely reviewing the decision and considering all of our options,” said Deanna Cohen, a spokeswoman for the Department of Labor.
The issue has become especially urgent during the pandemic, as the incomes of thousands of drivers have collapsed.
“Today’s decision is a huge victory for app-based drivers across New York,” said Nicole Salk, a senior staff attorney at Legal Services NYC, who represents the plaintiffs.
In late March, Congress approved the so-called Pandemic Unemployment Assistance program to replace income for workers like contractors, who don’t qualify for traditional unemployment benefits. New York State and the ride-hailing companies have encouraged drivers to apply for this assistance.
But the new pandemic assistance program is typically far less generous than traditional insurance for full-time drivers, of which there are tens of thousands in New York. Previous rulings in the state had entitled drivers to traditional insurance.
Central to the case before Judge DeArcy Hall is data on driver earnings that would make it possible for the state to process unemployment benefits quickly.
The lawsuit contends that the state has failed to require Uber and Lyft to submit this information, despite the earlier rulings. In court proceedings this month, a lawyer for the state said that Uber had cooperated with a data request from the Department of Labor, though it was unclear if what was requested would allow the state to process benefits quickly. The lawyer said in court that the state had yet to review the data.
Lyft said in May that it was working with the state to provide data, but the state lawyer said at the court hearing that the company had yet to submit data similar to what Uber provided.
Without the earnings data that employers typically provide the state’s Department of Labor, drivers receive a statement saying that they have no earnings on file regarding their work for Uber and Lyft, forcing them into a bureaucratic process to demonstrate their eligibility for traditional benefits that can last months.
During court proceedings, the lawyer for the state accused Uber and Lyft of playing “games” to prevent the Department of Labor from being able to obtain the relevant earnings information through an audit. He said the companies did this by initially fighting determinations of unemployment eligibility, then withdrawing their appeals, which prevented a final determination that could be broadly applied to other drivers and could also be used to prompt an audit.
The ruling sheds light on the scale at which the companies employed this tactic, noting that there were about 294 cases in which the state had found Uber to be an employer and that the company had appealed 227 of them, only to abandon more than 200 of the appeals. There were about 78 instances in which the state deemed Lyft to be an employer, and the company abandoned nine of its 11 appeals, according to the ruling.
Judge DeArcy Hall said in a hearing that if the data “is categorically made unavailable by the gamesmanship of the company, that it is incumbent upon the Department of Labor to use all the tools in its tool kit to ensure that unemployment insurance benefits are nonetheless paid.”
She said later that the department “has allowed itself to be led by the leash” of companies like Uber and Lyft, but added that “my determination on this issue is in no way a condemnation of the Department of Labor” whose culpability remains to be litigated.
Alix Anfang, a spokeswoman for Uber, said the company had provided all the data requested by state officials. A spokeswoman for Lyft declined to comment. Neither company responded to a request for comment about the appeals tactics cited by the judge.
The lawsuit said the state’s failure to pay drivers’ unemployment benefits promptly violates the federal Social Security Act, which requires states to pay unemployment benefits “with the greatest promptness that is administratively feasible.”
Judge DeArcy Hall endorsed this argument, saying in court that “there seems to be a systemic failure with respect to the payment, the prompt payment and determination of unemployment insurance benefits with respect to those workers who were seeking unemployment benefits as a result of work performed” for the ride-hailing companies.
Uber and Lyft are facing litigation related to the issue of employment status in other states, including California and Massachusetts, which have filed lawsuits claiming that the companies are misclassifying drivers as independent contractors.
On Friday, the Pennsylvania Supreme Court affirmed a ruling that an Uber driver was not self-employed for the purposes of benefit eligibility, as the company had argued, bolstering drivers’ claims to traditional unemployment insurance in that state as well.”
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