Uber Lawsuit: Uber’s Long History of Shady Dealings With Its Drivers
Author: Daniel Gala
“What started as a way to tap a button to get a ride has led to billions of moments of human connection as people around the world go all kinds of places in all kinds of ways with the help of our technology,” the website for Uber Technologies, Inc. immodestly declares, adding later, “We’re building a culture within Uber that emphasizes doing the right thing, period, for riders, drivers, and employees.”
These words—part of a multi-million-dollar public-relations campaign aimed at rebranding Uber following a slew of negative publicity over aggressive intrusions into wary municipalities, an alleged culture of sexual harassment, and a shaky track record of adhering to local laws and regulations—doubtless ring hollow to the tens of thousands of current and former Uber drivers who have been exploited by the company’s oftentimes ruthless business practices.
Despite Uber’s stated emphasis on “doing the right thing, period,” scores of lawsuits, media reports, and even, in some instances, the company’s own admissions tell a much different story. From allegations of tip theft to improperly deducting state taxes from drivers’ share of the fare to other breaches of the company’s own payment agreements, Uber has faced a great many accusations of failing to live up to its legal and financial commitments to its drivers, let alone its own lofty, moralistic aspirations.
For example, in just one example of Uber’s questionable practices, The New York Times has accused the ride-sharing company of potentially ripping off tens of thousands of drivers to the tune of hundreds of millions of dollars in New York state alone.
Below is a brief summary of Uber’s ongoing lawsuits and legal travails vis-à-vis its drivers.
Uber Lawsuits Over Drivers’ Employment Status
Since the early days of ridesharing, one of Uber’s more controversial business practices has been its policy of classifying the company’s drivers as independent contractors rather than employees. While treating its drivers as independent contractors provides Uber with a wide range of financial and legal benefits—not least of which is the avoidance of payroll taxes—state and federal employment laws define a worker’s status based on the conditions of employment, not an employer’s choice of classification.
As a result, Uber has faced a number of lawsuits across several states in which plaintiffs have alleged that Uber is in violation of labor standards by misclassifying its drivers as independent contractors rather than employees. These lawsuits have achieved mixed results, but the overall trend shows plaintiffs’ slowly chipping away at Uber’s legal defenses.
Uber Lawsuit: September 2018 – Ninth Circuit Court of Appeals Reverses District Court Decision Allowing Drivers Who Signed Arbitration Clause to Join Class Action
In a setback from drivers who had signed Uber’s arbitration agreement, the Ninth Circuit Court of Appeals issued in September 2018 a ruling that reversed a lower court decision rejecting Uber’s attempt to compel arbitration with those drivers who had signed the company’s arbitration agreement. As a result, the court also reversed the lower court’s order regarding certification of plaintiffs as a class.
“The panel reversed the district court’s denial of Uber Technologies, Inc.’s motions to compel arbitration, reversed the district court’s class certification orders, and reversed as moot and without foundation the district court’s Fed. R. Civ. P. 23(d) orders in several putative class actions brought by current and former Uber drivers alleging violations of various federal and state statutes arising from Uber’s classification of drivers as independent contractors rather than employees,” the court staff wrote in a summary attached to the decision.
The Ninth Circuit decision overturned a previous ruling by the US District Court for the Northern District of California that had found Uber’s arbitration agreement to be unenforceable.
“On December 6, 2013, the district court…enjoined Uber from its arbitration agreement against those drivers who entered into the agreement but did not opt out, required Uber to revise the agreement to include enhanced notice provisions, and directed Uber to extend the opt out period for an additional thirty days once the revised agreements were distributed,” the Ninth Circuit summarized before reversing this decision on the basis of the Ninth Circuit’s own precedent in a previous case, Mohamed v. Uber Technologies Inc., which had been decided in 2016.
Uber Lawsuit: April 2018 – California Supreme Court Shifts Burden To Companies In Proving Workers Are Not Employees
On April 30, 2018, the California Supreme Court filed a landmark decision in a case that, though it did not directly involve Uber or its drivers, altered the state’s legal test for determining whether a worker qualifies as an employee or an independent contractor in a manner that observers expect will have enormous ramifications for future litigation involving ride-sharing companies.
For example, the article reporting the decision in The New York Times ran under the headline, “Gig Economy Business Model Dealt a Blow in California Ruling” and began, “In a ruling with potentially sweeping consequences for the so-called gig economy, the California Supreme Court on Monday made it much more difficult for companies to classify workers as independent contractors rather than employees.”
In its ruling on Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, the California Supreme Court decided to change the test to be applied within the state when determining whether a worker qualifies as an employee or an independent contractor. The newly adopted standard, sometimes referred to as the ABC test, previously had been used in other states, such as Massachusetts. Significantly, the test shifts the burden from the worker to the company in proving employment status, placing the onus on Uber to demonstrate that its drivers do not provide the company with services that fall within the scope of Uber’s usual course of business.
For this reason, Uber has steadfastly maintained that it is a technology company, merely developing and furnishing the tech that connects passengers to drivers, not a transportation company involved in the business of actually moving passengers from place to place. While, practically speaking, this distinction may appear trivial, from a legal standpoint, it has enormous ramifications, as the California Supreme Court explained in its decision.
“Under both California and federal law, the question whether an individual worker should properly be classified as an employee or, instead, as an independent contractor has considerable significance for workers, businesses, and the public generally,” the court wrote. “On the one hand, if a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing worker’s compensation insurance, and, most relevant for the present case, complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees. The worker then obtains the protection of the applicable labor laws and regulations.”
“On the other hand,” the court continued, “if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits, and the public may be required under applicable laws to assume additional financial burdens with respect to such workers and their families.”
Uber Lawsuit: February 2018 – Class Action Certification Approved For Federal Lawsuit In San Francisco
In February 2018, Uber drivers suing the company over breach of contract claims received class action certification from the US District Court in San Francisco. The lawsuit alleges that Uber violated its own payment agreement—which calls for drivers to receive 80% of each fare, with Uber receiving a 20% commission—when it introduced a new upfront pricing model in August 2016.
According to the Los Angeles Times, the order set forth by Judge William Alsup states that any driver in the United States that possesses the following characteristics may join the class:
• Made less money due to Uber’s upfront pricing model
• Drove a passenger charged via upfront pricing before May 22, 2017
• Drove under either the UberX or UberSelect classifications
• Opted out of Uber’s arbitration agreement when signing up with the company
Uber Lawsuit: July 2017 – Conditional Certification Of Class Action Lawsuit in the Middle District of North Carolina
In July 2017, a North Carolina federal court tentatively approved class-action certification for a lawsuit brought against Uber by a number of drivers who accused the company of violations of the Fair Labor Standards Act. The ruling was particularly significant as, just a month prior, a court in Florida had denied class-action certification on similar claims. Also, the conditionally-approved class of plaintiffs, as defined by the North Carolina federal court, could include any Uber driver in the United States, not simply in the venue state, as had been the case in other rulings.
“The ruling today is going to allow drivers across the country to band together to challenge Uber’s misclassification of them,” Paul B. Maslow, a lawyer for the drivers, was quoted by The New York Times as saying at the time. “They are employees and should be getting minimum wage and overtime as required by federal law.”
Uber Lawsuit: April 2016 – Uber Announces $100m Settlement Of Class-Action Cases In California And Massachusetts, “One Of The Largest Ever Achieved” Over Employment Classification
On April 21, 2016, Uber posted in its online Newsroom under the innocuous title “Growing and growing up” a piece “Written by Travis,” an apparent reference to company co-founder and then-CEO Travis Kalanick. Scattered amidst self-congratulatory back-patting about the greatness of Uber and half-hearted soul searching about the company’s supposed short comings are facts relating to what appears to have been the article’s main purpose: to announce a monumental $100 million settlement of class-action lawsuits in California and Massachusetts brought by drivers who claimed they had been improperly classified as independent contractors rather than employees.
In summarizing the terms of the deal, Kalanick is quick to point out (in his first bullet point, in fact) that under the settlement “[d]rivers will remain independent contractors, not employees.” Only after that does Kalanick concede that, in order for plaintiffs to make this concession, Uber essentially had to pay them off to the tune of $84 million, with “a second payment of $16 million if Uber goes public and our valuation increases one and half times from our December 2015 financing valuation within the first year of an IPO.”
However, this is the only mention Kalanick makes of the potentially nine-figure monetary settlement, as he devotes the rest of the announcement to minor details like changes to Uber’s driver deactivation policy and to arguing that drivers actually are ecstatic about their independent contractor status (even quoting one who supposedly “wouldn’t have it any other way” and another who would “quit if [Uber] tried to make me an employee”), which might make one wonder who filed the lawsuit in the first place and why Uber would agree to pay $100 million for drivers to accept a status they were so keen on keeping in the first place.
Reading behind the transparent PR speak, Uber’s message is clear. They’re not about “doing the right thing, period.” They’re about making the most money for themselves and their investors, drivers be damned.
That Uber was willing to pay out up to $100 million in order to ensure that drivers in California and Massachusetts would remain classified as independent contractors for the foreseeable future showed just how valuable maintaining this status is to the company. In fact, the “settlement is one of the largest ever achieved on behalf of workers who alleged that they were improperly classified as independent contractors,” an attorney for the drivers told Mother Jones at the time.
Uber Lawsuit: July 2017 - Uber Accused Of Improperly Deducting Sales Tax From Fares Earned By New York Drivers
According to a July 2017 report in The New York Times, just weeks after admitting to improperly extracting its commission from pre-tax rather than after-tax fares and agreeing to compensate affected New York State drivers with interest, the company faced accusations that it had been improperly deducting New York state taxes, which are supposed to be paid by passengers, from the drivers’ share of the fare, in violation of Uber’s own payment terms. The New York Times estimated that the practice potentially could have cost tens of thousands of drivers hundreds of millions of dollars over the span of several years.
“In New York, the company must reckon with a state sales tax of nearly 9 percent per ride, as well as a 2.5 percent “black car fund” surcharge to cover workers’ compensation and death benefits,” the Times reported.
However, rather than tacking this amount on top of the regular fare, or deducting it from Uber’s share of the fare, Uber simply deducted it from the driver’s share, meaning that drivers potentially were undercompensated by about 11.5% for every ride they completed in New York state dating back at least to 2014 and potentially to the company’s entry into the state in 2012.
Uber Lawsuit: May 2017 - Uber Admitted To Miscalculating Commissions, Improperly Taking Tens Of Millions From New York Drivers
In May 2017, Uber admitted to miscalculating commissions on millions of rides in New York state, calculating the ride-sharing company’s percentage of the fare based on the pretax rather than after-tax value of the ride, according to The New York Times. While the company acknowledged the issue and vowed to compensate drivers as soon as possible, it represented yet another instance of the company getting caught ripping off the very drivers that make its multibillion business possible (and for whom they purportedly emphasize “doing the right thing, period”).
Uber Lawsuit: September 2016 – Judge Gives Preliminary Approval To Settlement With Customers Over Claims That Uber Pocketed Tips It Told Riders Were Going To Drivers
In September 2016, Judge Edward Chen of the United States District Court in San Francisco, tentatively approved a plan to pay roughly $350,000 to nearly 50,000 customers who received a promotional email from the company stating that 20% of every ride’s fare automatically went to gratuity, which customers were led to believe was being paid to their driver.
However, as Uber rider Caren Ehret claimed in her original lawsuit filed in 2014, in practice, Uber was pocketing 40% to 50% of this amount. Meanwhile, Uber also was engaging in the practice of discouraging its drivers from accepting cash tips to passengers, The Los Angeles Times reported.
Under the terms of the settlement agreement, Uber drivers did not stand to receive any compensation for the stolen tips.
Stay tuned to TheLawFirm.com for the latest updates on the legal wrangling between Uber and its drivers!
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