On Tuesday U.S. District Judge Edward Chen granted class action status to suits filed by Uber drivers who claimed they were owed benefits from the company claiming they were treated as employees but paid like contractors. The original suit, O’Connor v. Uber Technologies involved only four drivers, Douglas O’Connor, Thomas Colopy, Matthew Manahan, and Elie Gurfinkel. They initially sued Uber for reimbursement for various expenses such as vehicle maintenance and fuel. This class action suit will allow them to prosecute this lawsuit against Uber on behalf of themselves and a putative class of approximately 160,000 other “UberBlack, UberX and UberSUV drivers who have driven for Uber in the state of California at any time since August 16, 2009.”
In response, Uber claimed the case would actually affect only a few hundred drivers as Abby Horrigan, the managing counsel for employment at Uber pointed out, “the ruling found that only drivers who either stopped driving before June 2014 or drove after June 2014 but chose to opt out of the arbitration option in their agreements, are eligible.” However, it excluded Uber drivers who work for third-party companies (which would actually eliminate Colopy from the class) and more recent drivers who are bound by Uber’s 2014 arbitration clause, which waives their right to be part of a class-action suit.
Uber has also argued there is “no typical Uber driver” and the vast majority of its drivers would rather be classified as independent contractors as it offers them a fair amount of flexibility. The company went so far as to submit 400 written declarations from drivers to the court stating as such. In response, Judge Chen questioned the relevance of the 400 drivers claiming the testimonials as “statistically insignificant.” From the ruling:
“First, while Uber claims that “countless drivers” hail the firm as a “liberator” from traditional employment, Uber has only submitted evidence of the beliefs of a small fraction of its California drivers: 400 out of 160,000 (0.25%). Notably, even out of these 400 declarations, Uber identified only about 150 where the driver actually stated that she prefers to remain an independent contractor. See Evangelis Decl., Ex. 10 (chart listing roughly 150 “Drivers Who Want To Be Treated As Independent Contractors With Uber”). There is simply no basis in the record supporting Uber’s claim that some innumerable legion of drivers prefer to remain independent contractors rather than become employees.”
Despite the Judge’s ruling, Ted Boutrous, an attorney for Uber, commented that the company is “likely to pursue an appeal for this decision because it is based on several key legal errors,” which exhibit 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.”
The implications of this suit could spell disaster for Uber’s business model as well as those of others that operate in the so-called ‘1099 economy.’ Despite the fact that the company has raised enough capital to achieve a valuation over $50 billion, having to provide traditional protections like minimum wage, health insurance and other benefits would inevitably have negative impacts on the company’s bottom line. The ruling could also set precedence for this type of lean business model, forcing the next generation of startups to find other alternatives to classify their workers and still operate as cheaply as possible. In short, the next startup empire we see could likely not rely on independent contractors.