Uber challenges class status ruling that expanded employee vs. independent-contractor case from merely three drivers to thousands.
On Tuesday, September 15, 2015, Uber filed an appeal to a federal judge’s ruling that granted class-action status to a driver-initiated lawsuit which challenges how the ride-hailing service classifies its drivers.
Less than two weeks ago, on September 1st, U.S. District Judge Edward Chen approved class-action status for the underlying lawsuit, in which three drivers sued Uber for classifying them as independent contractors rather than employees. The case is being closely followed by virtually every industry since the outcome of the case could have a huge impact on Uber’s business model and also create a ripple effect throughout the entire on-demand economy.
Uber’s 22-page request to appeal, which was filed in the 9th U.S. District Court of Appeals, called Judge Chen’s ruling “manifestly erroneous” and asked the appeals court to reverse the judge’s order. In the petition, Uber’s counsel questioned why the judge would allow a single jury to decide whether thousands of drivers who use Uber in multiple and varying ways should be included in the case when the California Labor Commission had previously reached two different conclusions about two separate drivers.
Uber makes a smartphone app that sidesteps taxicabs and provides a connection between individuals who want a ride and drivers who pilot their own vehicles. Since its launch six years ago, the ride-hailing service has grown from a San Francisco-based startup into a multinational service in 295 cities and 55 countries.
Uber’s current classification of drivers as contractors means the company is free of the added costs, record keeping and related costs attendant to the employer/employee relationship including, but not limited to, Social Security, health insurance, paid sick days and overtime. Drivers for Uber also supply and maintain their own cars, saving Uber the added expense of fuel costs, vehicle maintenance, insurance and similar vehicle expenses.
In the event that Judge Chen’s initial classification status holds, Uber may potentially have to defend challenges by thousands of additional California-based Uber drivers, rather than just the few drivers who first filed the complaint. The driver classification lawsuit was originally filed in 2013. Though Uber and their counsel have repeatedly attempted to secure a dismissal of the litigation, the recent ruling by Judge Chen was an unwelcome endorsement that the claims may actually have merit.
In light of this lawsuit and the court’s ruling on it, coupled with recent Department of Labor and NLRB decisions broadening the definition of what is required to be an “employee”, several on-demand companies appear to be rethinking the independent contractor classification. As but one example, the grocery-delivery startup Instacart issued a statement in June 2015 that it will be altering the status of its personal shoppers from contract workers to part-time employees. Homejoy, the national house-cleaning startup, followed suit one month later by deciding
that it would be permanently closing its after being sued over the classification of its workers. Such concerns have been an impetus for similar lawsuits which have recently been filed against several other on-demand companies, including Handy, Shyp, Washio and Postmates, among others.
Article by Peyton Smith, a former Partner at Reed & Scardino. For further information about labor and employment law and human resources, please contact us.