Uber Just Lost A Legal Fight That Could Transform The Sharing Economy
The ruling by US District Judge Edward Chen means that Uber drivers in California can sue as a group over whether they should have received tips. In a separate statement, Uber said Chen allowed only a “tiny fraction” of the 160,000-member class to go forward. If the class-action suit succeeds, it could force Uber to pay drivers for health insurance, workers’ compensation and work expenses such as tolls, fuel and auto repairs.
Addressing the court, Chen estimated the number of drivers in the suit could at least be in the hundreds, meaning the company could be on the hook for more in damages if it loses the case. However, it excluded Uber drivers who work for a third-party company and more recent drivers who are bound by Uber’s 2014 arbitration clause.
Shannon Liss-Riordan, a lawyer representing the drivers, said that tens of thousands of drivers are likely included in Chens ruling.
The company has said in the past that many if not most of their drivers use their platform in ways that aren’t akin to full employment, either for less than 15 hours a week or in concert with other driving platforms.
Another important thing is that Chen has granted class-action to the lawsuit.
The cost of paying back wages and payroll taxes for the class Chen certified Tuesday, while certainly smaller than the billion that the company is now worth according to investors, would be vast – especially if plaintiffs’ attorneys accept Chen’s invitation to make further arguments about including other drivers in the class, and succeed.
Uber also argued that other Uber drivers, unlike the named plaintiffs, preferred being independent contractors instead of employees.
Uber argued that granting the class-action status would be “a determination that would destroy the very independence and flexibility that countless drivers love about Uber”.
The decision is a major blow to Uber, who has consistently argued that drivers are independent contractors, and built its business model and cost structure around the premise. The company collected testimonials from roughly 400 drivers who stated that they want to keep working as contractors rather than employees, but the Judge rejected this argument and ruled not to dismiss the class-action part.
The company chose to suspend its low-priced service in France after a nationwide taxi strike in protest against Uber turned violent. Uber says that drivers are independent contractors and that it is not liable for gas and vehicle maintenance. “Individuals who registered with Uber as a corporation also can not participate in the class [action]”, the statement said.