Florida lawmakers will likely pass a measure that classifies drivers for companies such as Uber and Lyft as independent contractors rather than employees, marking the latest state to attempt to regulate the rapidly growing and litigious ride-hailing workforce.
The bill, now on the governor’s desk after the Legislature passed it this month, has the potential to limit the number of lawsuits against companies in which the drivers sue over workers’ compensation insurance and unemployment benefits, as employees have more rights in wage-and-hour disputes. It also creates statewide protections for both the drivers and consumers.
While it’s unclear how much teeth the Florida law would have in the courts, this is the latest example of a state responding to pressure from lawsuits, the companies’ lobbying efforts and the consequences of the growing gig economy. Critics fear any carve-outs for companies will limit the ability of drivers to sue for their rights and supporters say a framework is needed to create uniform regulations to help boost the new businesses.
“The patchwork of regulations—city by city, state by state, even judge by judge—is difficult,” said Richard Meneghello of Fisher Phillips, a Portland-based attorney who helps lead the firm’s new gig economy practice. “The courts are having a hard time because we are trying to address a 21st century problem with 20th century laws.”
In response to prolific court battles, states in recent years have passed measures that regulate ride-hailing companies that include a framework for insurance requirements, recordkeeping, inspections and background checks, among other standards.
Florida would be one of the first states to delve into the distinction between contractor and employee. Several other states have made the distinction, including Arkansas, West Virginia and Colorado, said Doug Shinkle, transportation program director at the National Conference of State Legislatures.
“In general, states have steered clear of getting into that,” Shinkle said. “Going forward that is likely to change, as there continues to be pressure and awareness about further strains on the social safety net and how these cases play out in the courts.”
Yet, this is not necessarily a new battle. Companies that hire workers such as cleaners, truckers and call center employees have fought for decades over contractor versus employee status, said Shannon Liss-Riordan, who has represented employees in several high-profile cases against Uber. The so-called sharing economy is just the latest iteration.
“By classifying drivers as contractors, the companies avoid all the responsibility of being an employer and shift the cost of doing business in hopes of avoiding liability for unemployment or workers’ compensation,” she said.
Such laws could have broader implication for the emerging sharing economy and create a larger precedent for other companies. At least 45 states, including California, Georgia and Texas, as well as D.C., have established some sort of regulatory framework for such companies, according to the National Conference of State Legislatures.
State legislatures are increasingly tackling these issues to either refine existing laws or create new ones. A California bill introduced last year would have enabled contractors to collectively organize and bargain. Illinois is debating a bill that would give these drivers a tax credit to purchase or repair their vehicle.
The Florida legislation passed with bipartisan support, yet some local municipalities and taxi companies opposed it. Lyft and Uber are supportive of these measures, despite pushing back in some cities against background checks for its drivers and flouting other regulations.
“The future of transportation options includes a focus on shared mobility, and as we move closer to autonomous vehicles on our roadways, the future of ridesharing is very bright,” said the bill’s sponsor, Republican state Sen. Jeff Brandes, in a statement. “With this legislation Florida will have a uniform set of standards for the services our businesses demand, our tourists have come to expect, and our residents deserve.”
The Florida bill establishes regulations for a business dubbed a “transportation network company” in the state. It establishes minimum insurance requirements, background screenings for the drivers and some consumer protection provisions. It also requires an independent review to be conducted in the case.
Florida cannot legislate federal law, so it’s unclear what relevance this law would have, Liss-Riordan of Boston’s Lichten & Liss-Riordan said. She said she has not seen a law passed that would affect wage laws of a particular state, but such measures could be a “slippery slope” that could shirk federal protections for workers.
“It’s a dangerous thing for states to go in and carve out exceptions to wage laws for these companies that have been growing in popularity,” she said. “Why do they need a special pass on employment laws? I don’t understand why they would take protections away from workers to help these companies get richer.”
Courts and municipalities have been grappling with the issue, particularly over how to classify drivers and what employment standards they should adhere to, Meneghello said.
“The lawsuits against them are definitely sort of a galvanizing force behind more certainty with misclassification,” he said. “There are impediments to smaller businesses entering into the market. They can’t weather the storm.”
The passage of the Florida law would follow rulings in favor of independent contractor status for ride-hailing drivers.
The U.S. Court of Appeals for the Second Circuit this month ruled that “black car” drivers are contractors, not employees. The U.S. Labor Department backed the drivers in that case, arguing they should be considered employees. The ruling only affects drivers in New York, Connecticut and Vermont. A Florida state appellate court ruled in February that Uber drivers are independent contractors, not employees. An arbitrator in California in January found an Uber driver there was an independent contractor.
Millions have been paid out in settlements, however, to drivers in other states as a result of such conflicts between drivers and the companies.
“The country yearns for a middle ground between a contractor and employee,” Meneghello said. “It’s great to see some momentum here. If I’m a company, I see it as giving me hope.”