The law is not always black and white. Many times, what is legal is not clear, which can cause conflicts, particularly when doing business in new industries that usually lack clear regulatory rules. This can result in serious legal issues for these businesses. Uber is now in this type of situation and is currently facing a class action employment litigation case in California.
Recently, a federal court in California has granted Uber drivers class action status in litigation regarding whether or not these drivers are legally considered employees or independent contractors. This case is important since Uber’s business model heavily depends upon the drivers legally being considered independent contractors. The term sharing economy refers to businesses that match customers and service providers online, and other new startup companies within the sharing economy may also be affected by the outcome of this case.
The class action case revolves around not only the question of whether the drivers are employees or independent contractors, but it also involves a demand for tips, which have not been passed on to the drivers. The plaintiffs must still submit more evidence in order to be granted class action status in a lawsuit asking for reimbursement of other expenses. Also, those drivers who had worked for Uber since May 2014 must have specifically opted out of an agreement to arbitrate in order to participate in the lawsuit against Uber. The class action status granted gives the plaintiffs more leverage when negotiating for a settlement.
Uber plans to appeal the recent ruling; however, the company has also indicated that only a small fraction of the possible 160,000 drivers in California are actually eligible to be included in the class action lawsuit. Also, one of the three plaintiffs who originally sued Uber has been deemed ineligible to represent the class. However, the plaintiffs are arguing that the defendant’s assertion regarding the size of the possible class is inaccurate.
Now, the two sides will be looking to continue their employment litigation battle in appeals court in California. This case illustrates how unclear regulatory rules can cause legal problems for businesses in any industry, not just new industries within the sharing economy. Therefore, it is best for businesses to ensure they have strong compliance plans in place. However, even with a compliance plan, many companies will still face employee lawsuits that will require legal action on the part of the employer.
Source: reuters.com, “Uber drivers granted class action status in lawsuit over employment“, Dan Levine, Sept. 1, 2015