A California lawsuit against Uber just got a whole lot busier. On September 1st, U.S. District Court Judge Edward Chen granted class-action status to a suit brought by three Uber drivers, who are alleging the ride-share company misclassified them as independent contractors instead of full-fledged employees.
Federal Judge Certifies Uber Class Action Lawsuit
The drivers are accusing Uber of abusing the definition of “independent contractor,” treating them like employees while refusing to provide employee benefits such as expense reimbursement, health insurance and worker’s compensation. The certification comes less than three months after the California Labor Commission ruled that one of Uber’s drivers was an employee and was misclassified as an independent contractor. Judge Chen’s class certification opens the doors for over 160,000 Uber drivers to join the suit, allowing them to seek reparations from the beleaguered sharing economy behemoth. Uber has responded bitterly to the class certification, claiming Judge Chen’s opinion contains clear legal errors and declaring their intention to appeal the decision to the 9th Circuit.
Class Action: What is it, and What is Required for Certification?
Class action lawsuits allow for a more efficient way to handle legal disputes because all of the resources from the parties and the courts go into litigating the one case, as opposed to hundred–if not thousands–of individual trials.Class actions do this by allowing a class representative, who is a named plaintiff in a lawsuit, to represent all of the plaintiffs in the case. However, before a “class” can bring a lawsuit, a judge must certify that the case should proceed as a class action (as opposed to a bunch of individual lawsuits). In federal courts (like the District Court for the Northern District of California, where the Uber suit was certified), there are four requirements for class action certification.
First, there must be a lot of potential plaintiffs (this requirement is referred to as “numerosity”). According to Judge Chen, the Uber drivers have been able to satisfy this requirement because:
[t]here is sufficient evidence in the record to suggest that theclass being certified will number at least into the hundreds. For instance, in other litigation, Uber has alleged that “several hundred” drivers have opted out of the arbitration agreements.
Sidebar: Uber’s agreement with its drivers requires that any disputes be resolved by arbitration, which potentially prevents the drivers from joining a class action lawsuit, unless they choose to opt out of the arbitration clause. For more information on alternative dispute resolution for startups, see our article here.
Second, there must be at least one question of law or fact that is common to all class members (the requirement of “commonality”). According to Judge Chen, the are several questions that are common among all class members including, most notably, whether the drivers should be classified as employees or independent contractors, and whether Uber charged passengers a tip but failed to remit those tips to drivers.
Third, class representatives’s claims must be typical of the others in the class (the requirement of “typicality”). Uber claims that the class representatives in the lawsuit are not typical of the other drivers:
Plaintiffs, who were onboarded in San Francisco, Los Angeles, and San Diego, are not typical of drivers from other cities, or even of drivers in their own cities who were ‘onboarded’ at different points in time or by different people.
In addition, Uber argues that some Uber drivers (not the class representatives) own their own independent transportation companies that contract with Uber.
Judge Chen was not persuaded that those arguments are legally significant. In other words, sure, there might be small differenced between the plaintiffs, but the claims made by the class representatives (that they were misclassified) is typical of the claims by other Uber drivers.
Fourth, the class representatives must be able to fairly and adequately protect the interests of the others in the class (the requirement of “adequacy”). This requirement is very similar to the typicality requirement above, and the court addressed those requirements together.
What’s Next for the Uber Class Action Lawsuit?
From public statements, it appears as if Uber is taking issue with Judge Chen’s finding on the topic of typicality: Uber’s lawyers have tried to puncture the myth of a “typical” Uber driver by assembling the declarations from drivers from all across California. As Uber attorney Ted Boutrous says:
The mountain of evidence we submitted to the court—including the declarations of over 400 drivers from across California—demonstrates that two plaintiffs do not and cannot represent the interests of the thousands of other drivers who value the complete flexibility and autonomy they enjoy as independent contractors. (source: Wired.com)
What do Uber Drivers Have to Prove to Win the Class Action Lawsuit?
Based on this, Uber is bound to appeal Judge Chen’s decision to the Ninth Circuit, which could take months to resolve. Assuming that Uber is not able to reverse the certification on appeal and the case goes forward on the merits, proving that the drivers were misclassified as independent contractors will not be a walk in the park. To win this suit, even as a class action, Uber drivers must convince the court that their relationship with Uber is something more than the free-flowing “independent contract” Uber claims. In California, there is no clear separation between employees and independent contractors, and most determinations are made by sifting through judicial decisions on similar topics.
Be that as it may, certain factors do play into the equation, and will raise their heads during the Uber suit. A central question revolves around whether Uber controls their drivers “both as to the work done” and the manner and means in which the work is performed. Other relevant questions include whether Uber “supplies the instrumentalities, tools, and the place for the person doing the work” and what sort of investment Uber drivers are forced to make in their Uber-related work. This is a highly fact-specific inquiry.
The drivers will likely argue that Uber’s requirements, including pricing structures and a rather brutal driver rating system, exert enough power over their activities to qualify them as employees. They will also point to the fact that they have to use Uber’s mobile application, and that Uber determines the fare to be charged and the route for each ride.
Uber will counter that the drivers use their own vehicles and smart phones, and that the drivers can set their own schedules and hours. Ultimately, a jury or a judge will have to determine whether Uber exercises enough control over the drivers so that they should be classified as employees.
What Happens to Uber if the Drivers Win the Class Action Lawsuit?
If the drivers prevail and Uber is forced to classify them as employees, the consequences could shake up the sharing economy. The difference in the legal definitions of employees and independent contractors is substantial. Employee classification would bestow an array of benefits and protections on Uber drivers, and enable them to claim reimbursement on many Uber-related expenses. It would level the playing field for Uber’s challengers, who protest that Uber’s massive savings in payroll taxes allow them to leapfrog the competition. However, it could also drain the “1099 economy” of the very flexibility that’s made it so desirable in the first place. Prices could go up, and before long Uber’s sprawling networks of crowdsourced rides and instant connections could calcify into the formalism of taxi-style business transactions. Many investors and startups are watching this legal battle closely, as the outcome could have ripple effects in Silicon Valley. For now, though, most of these questions remained unanswered. Judge Chen’s decision ensures they’ll be a topic of heated debate for many months to come.
DISCLAIMER: The information in this article is provided for informational purposes only and should not be construed or relied upon as legal advice. This article may constitute attorney advertising under applicable state laws.