Drivers for Uber Technologies and Lyft won the right to immediately receive unemployment insurance benefits after a federal judge ruled New York Department of Labor was taking too long to make payments.
U.S. District Judge LaShann DeArcy Hall in Brooklyn on Tuesday cited a backlog of claims by the ride-share drivers who sued the state in May, claiming it was either failing to pay their unemployment benefits or taking months to make them, even while other workers got them in as little as two weeks.
The judge said there had been “an avoidable and inexcusable delay in the payment of unemployment insurance,” to the drivers and directed the state to create a streamlined process for them to apply for unemployment. DeArcy Hall further criticized app-based companies like Uber and Lyft for engaging in “gamesmanship” by arguing the drivers are self-employed and therefore don’t need to broadly report wages and earnings.
DeArcy Hall gave the state a week to create a working group to deal with the backlog. She also gave the Labor Department 45 days to resolve outstanding claims.
The ruling stems from a years-long legal battle between drivers’ advocates and the state and the ride-hailing industry. A New York court determined last year that a handful of drivers should be considered employees for the purposes of unemployment insurance. Uber has said the ruling applies to only the specific drivers involved in the case, and has periodically challenged attempts by other drivers to claim unemployment benefits.
Zubin Soleimany, general counsel of the New York Taxi Workers Alliance, decried Uber’s position as a way to erect logistical hurdles when its legal arguments failed. “There’s a real sense of vindication for drivers who have been stuck in limbo for far too long in what is a matter of settled law,” he said.
Courts in most other states haven’t ruled on whether ride-hail drivers should be eligible for unemployment benefits. The question continues to be hotly contested, and Tuesday’s decision will have no sway in that broader debate. It could result in significant payouts for drivers in New York who have not yet been able to secure benefits.
The judge said while the state provided evidence showing it tried to obtain wage and earnings information from app-based companies, the evidence also shows the companies “have appealed the vast majority of those decisions — and then abandoned most of those appeals,” causing more delays.
“While the New York Department of Labor may be hamstrung by the conduct of app-based for hire vehicle companies in its effort to obtain wage and earnings data universally, this should not, as it has, result in delays to the prompt payment of unemployment benefits to drivers,” DeArcy Hall said.
Uber gave the New York Department of Labor all the data it requested, company spokesperson Alix Anfang said in a statement.
“Our current employment system is outdated and unfair because it requires that employees get benefits and protections, while independent workers who choose flexible work don’t,” Anfang said. “We will continue to fight for all workers to get financial support — not just those doing a certain type of work.”
The judge also noted the state had argued “it would be imprudent to dedicate resources to providing preliminary relief” and pay the drivers. “To the contrary, it is precisely because of the current economic climate that such immediate relief is demanded,” she said.
During the pandemic, demand for ride hailing has cratered, and with it driver incomes. Business dropped 78% and 75% for Uber and Lyft respectively during the month of June, according to researcher Second Measure.
New York is one of Uber’s most important markets. The city — along with Chicago, Los Angeles, the San Francisco Bay area and London — represented 23% of gross bookings from rides in 2019, according to the company’s most recent quarterly report. Uber didn’t provide additional metrics for the New York market, like how many drivers the unemployment ruling could affect.
Lyft didn’t disclose regional market details in its most recent filing.
A spokesperson for the Department of Labor didn’t immediately return an email seeking comment about the decision. A representative for Lyft declined to comment.