Lyft, Inc., the popular rideshare app that connects passengers in need of a ride to drivers who are willing to provide a ride, was recently hauled into court by three drivers, who filed separate actions alleging misclassification as independent contractors rather than employees. The case entitled Turrieta v. Lyft, Inc., NO. B304701, 2021 Cal. App. LEXIS 815 (Ct. App. Sep. 30, 2021) was brought pursuant to California's Private Attorney General Act of 2004, commonly known as PAGA. PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code Violations.
Why This Case is Important
The court found that other plaintiffs in a similar PAGA action against the same employer lack standing to move to vacate, or appeal a judgment entered by the court after the court has already approved a settlement of a different plaintiff's PAGA suit against the same employer. The Lyft drivers did not have standing to intervene in a separate PAGA case and overturn a court-approved settlement.
The three plaintiffs in this suit were drivers for Lyft. Through the use of a cellphone software application, Lyft connects customer riders to drivers for hire. Lyft does not own any vehicles or "employ" any drivers, rather, it receives a commission for each booking made through the app. Lyft classifies all drivers as independent contractors rather than employees. The plaintiff in this case, like several others who have come before him, claimed that classifying drivers as independent contractors instead of employees was a violation of the California Labor Code. The drivers used the Private Attorney General Act (PAGA) to assert recovery of damages for the violations on behalf of themselves, the State of California, and other similarly situated drivers.
After mediation, one driver, Turrieta, reached a settlement with Lyft that included the payment of damages to each driver affected by the misclassification between certain dates as well as the payment of attorney fees and penalties owed to the Labor and Workforce Development Agency (LWDA). As part of the settlement, the parties stipulated to the filing of a first amended complaint that would cover all PAGA claims that could have been filed against Lyft for the relevant time period thereby releasing all ripe and actionable claims.
Other drivers who had filed similar PAGA claims sought to intervene and objected to the settlement arguing that the settlement amount was too low and in violation of the purpose of PAGA. One argued that Turrieta’s settlement was achieved by use of the "reverse auction”, which is a settlement strategy sometimes used by defendants. In reverse auction, plaintiffs with parallel class action claims "compete" to secure a settlement from the defendant, the amount of which drops as the plaintiffs negotiate and potentially undercut the other. The benefit to defendants is that the reverse auction precludes other class actions from recovery once a settlement is reached with the lowest bidding plaintiff. In the case at hand, the trial court ruled that the competing plaintiffs lacked standing and therefore, approved the judgment. The Court of Appeals affirmed the trial court's ruling finding that plaintiffs in separate PAGA actions do not have standing to vacate the judgment or challenge the judgment on appeal.
What is PAGA?
The California Labor Code provides broad protection to California workers with a stated goal of preserving the health, safety and compensation of workers." Under PAGA, employers who violate these provisions may be sued by their employees for damages and statutory penalties. PAGA was enacted to provide employees the opportunity to act as a private attorney general and sue for civil penalties under the Labor Code, without having to rely on the state to bring the action to the court. That being said, although the plaintiff is the party named on the lawsuit, it is in fact a lawsuit between the State and the employer. PAGA actions that are filed by different employees with similar allegations and theories of recovery are permissible, but an employee who brings a PAGA action does so as a proxy of the state, and as such, any decision made by a court binds all of the nonparties who would be bound by the judgment as if it were brought by the government.
Lyft Drivers Did Not Have Standing to Appeal the Court's Decision to Approve the Settlement of a Fellow Plaintiff Under PAGA
The state appellate court, denied appellants challenge to the lower court's settlement decision as well as denying their motions to intervene. The court found that despite the fact that the other two Lyft drivers brought suit under analogous circumstances by way of PAGA, that did not create qualify them as a direct party in interest. The appellants failed to demonstrate that they had a direct and immediate interest in the outcome of the settlement, such as would give them a right to mandatory or permissive intervention. In sum, the court stated, "We are not persuaded that appellants' role as PAGA plaintiffs confers upon them a personal interest in the settlement of another PAGA claim." Thus, the plaintiffs motion to intervene was denied and the decision of the lower court affirmed.
- When facing a PAGA lawsuit, employers can rely on this case as part of its defense in limiting its exposure on lawsuits filed by separate plaintiffs during the same time period.
- Analogous plaintiffs bringing claims under PAGA do not necessarily possess an immediate or direct interest in the settlement of another plaintiff given the fact that the government is the actual party in interest.
- Although in the past some courts have rejected the reverse auction strategy as a valuable way to reach settlement, this decision supports employers who use this strategy. It gives them a stronger leg to stand on based on this court's finding that it is the state, not the individual plaintiff, that is the real party in interest.