A federal court in California granted class action status to all eligible Uber drivers in the Golden State. Drivers are currently suing the company, alleging that Uber illegally classifies them as independent contractors when they are in fact employees. In getting class certification, the drivers have overcome the first hurdle in a massive lawsuit that, should they succeed, could see them getting paid for past taxes, wear to their cars, and other expenses.
The lawsuit threatens to upend business as usual in the so-called "sharing" or "on demand" economies -- those tech companies which let users order goods or services instantly and who depend heavily on contractors to make it work.
Contesting the Contractor Label
The use of contract work has surged in the past decade, especially among tech companies like Uber, Lyft, and Task Rabbit. The appeal to companies is simple. By using independent contractors, businesses like Uber are able to avoid paying Social Security taxes on their workers' income, don't have to provide health care, and aren't nearly as accountable for their workers' negligence. In exchange, independent drivers get more control over their work by, for example, setting their own hours.
Except, the suing Uber drivers allege, Uber isn't nearly so hands off. According to the drivers, the company controls so much of their work that there's no way they can be considered anything but employees. Uber, for example, sets the rate users pay for a ride, tells drivers they can't accept tips, and requires that they drive a minimum amount. "Pervasive control" over one's work is a hallmark of the employer-employee relationship.
A Small Class, but a Big Threat
Not all 160,000 Uber drivers in California are eligible to join the class. Only drivers who opted out of the company's class action arbitration provisions in their 2014 contract update, or drivers who stopped driving beforehand, will be allowed to join the suit. Class certification wasn't easily obtained either. Lawyers for the three original drivers had to show that common facts could prove whether every class member was an employee or not. When it comes to employment classification in California, there are a lot of factors that come in to play, too. The court's decision reviewed 19 factors which, under Borello, will be relevant to the drivers' employment status.
Uber says said that it will likely appeal the class certification, potentially delaying the class action's advancement.
Last June, the California Labor Commission ruled that at least one former Uber driver was indeed an employee, not a contractor. The Commission ordered Uber to pay thousands of dollars in back pay, waiting time fees, and reimbursement for work expenditures. If the federal courts make a similar determination, Uber could see its profitability threatened and might be forced to reconsider one of the foundations of its business model.