Cash This Check for $250, and Sign Away Your Right to Sue

Cash This Check for $250, and Sign Away Your Right to Sue

“Cash This Check for $250, and Sign Away Your Right to Sue”
Bloomberg.com, July 2, 2019

Facing a possible class-action lawsuit, a startup sent dozens of checks to workers attached to settlement agreements.

By Ellen Huet

The perennial issue in the gig economy is whether workers should be classified as employees. Uber Technologies Inc., Lyft Inc. and other companies that rely on contract work have dealt with this question in a number of ways: staging PR campaigns, hiring lobbyists and arguing in court that they’re software platforms, not employers. At Getaround Inc., which helps people rent out their personal cars online, the startup is employing an uncommon legal tactic in the hope of defeating a class-action lawsuit before it starts.

As lawyers were working on one such case, Getaround preemptively sent dozens of checks to people who have worked with the company, attached to paperwork asking them to sign away their legal rights. According to a provision within the documents, depositing the money, even without signing the contract, would count as an agreement to waive their rights to sue. And almost everyone did.

The technique, which has been used selectively by companies in other industries, may prove to be particularly effective in the gig economy, where workers lack financial stability, said Bryan Schwartz, a Bay Area attorney who’s not involved in the case. It’s an “insidious” move, he said, because recipients likely can’t afford to seek legal counsel and weigh the benefits of holding out for a potentially larger payout from a lawsuit. “Low-wage workers, who are trying to make ends meet, are especially vulnerable,” said Schwartz, who serves on the board of the California Employment Lawyers Association, a worker advocacy group. “They’re going to sign and take the pittance to waive all their claims.”

Getaround’s legal strategy in this case, which involves whether contract workers should be treated as regular employees, highlights the creative measures gig companies will take to avoid scrutiny of their use of contractors. Many of these businesses are unprofitable and would lose even more money if they were forced to reclassify workers and pay employment benefits. In California, where Getaround and its ilk are based, companies are reeling from last year’s sweeping ruling by the state’s supreme court that limits the scope of work companies can classify as contracted. Lyft, Uber and Postmates Inc. have been lobbying lawmakers and publishing op-eds, hoping to find a workaround. And all these companies have faced lawsuits from contractors claiming they should get the same benefits and protections as employees.

A spokeswoman for Getaround said the company denies the allegations in the suit and will continue to defend itself. She wrote in an email that Getaround has a commitment to “fairly value the contributions of our employees.”

The legal gambit is known among employment lawyers as “Pick Up Stix.” The name is a reference to a 2009 case involving a fast-casual restaurant chain that used the strategy to secure settlements with workers seeking overtime pay. Recipients may not realize that accepting the check means they’re giving up a chance at a bigger payout down the line—or they may not be able to afford to wait.

Last year, a former Getaround worker, Amanda Ponciano, sued the company, saying her work as a “fleet associate” qualified as that of an employee but she was paid like a contractor. She and other fleet associates were paid around $15 an hour to move cars around the city and help prep vehicles to be rented. She said they went through a two-week training program administered by Getaround, were assigned shifts by the company, wore Getaround hats and jackets and used mostly company-provided equipment—details that she said support her misclassification claim.

In October, while her attorney worked to get class-action certification for the suit, Getaround sent out letters and emails to the 61 people in California who had worked the same job as Ponciano in recent years. In the envelope was a check and a message saying the money is theirs if they sign a settlement waiving their right to sue Getaround for anything that happened in the past. It also said they could simply deposit the check to indicate their consent. All but four took the offer.

The checks ranged from $250 to about $9,000, depending on how long the person had worked for Getaround, said Ramsey Hanafi, the attorney working on the suit. The company spent about $145,000 on this initial round of settlements, according to a legal filing. Around the same time, Getaround made its fleet associates employees. The company declined to explain its reasoning for the change.

Then, in May, Getaround sent a new settlement offer. It needed to amend its previous contracts because it had actually asked its fleet associates to sign away more rights than was legally tenable. (Though, in general, collecting preemptive settlements is considered a viable strategy.) In the new letter, Getaround told the workers that they could either sign the new agreement and get an additional $100 check mailed to them, or they could return the money they had previously accepted in the first agreement, Hanafi said. If they did neither, Getaround wrote in the emails, the company could sue them for the money.