Independent Contractor or Employee? Uber Faces Class Action Over Alleged Misclassification of its Drivers

In the closely watched matter of O’Conner v. Uber, U.S. District Court Judge Edward M. Chen granted class action status to a group of drivers who allege that they were cheated out of tips after they were mistakenly classified by the company as independent contractors. If Uber drivers were classified as employees rather than independent contractors, they would be entitled to a number of benefits afforded to employees under California law, including the right to share in customer tips. If this ruling is upheld and the employees are found to have been misclassified, this case could strike at the very heart of Uber’s business model and others in the sharing economy.
The plaintiffs requested class certification for 160,000 drivers who allege they did not receive their fair share of tips. At this point, it is unclear as to how many drivers will actually be covered as the class certification covers Uber drivers who worked for the company in California at any time since August 16, 2009, and who signed up with Uber under their own names and not through intermediary companies. The drivers must also have been paid by Uber, and if they accepted a contract with Uber, they must have opted out of the arbitration clause.

Judge Chen is also overseeing a related case that he intends to consolidate with O’Conner, if possible, to determine once and for all whether Uber drivers are independent contractors or employees. While the cases involve different issues, the common question is the nature of the drivers’ employment status – employee v. independent contractor.

Uber’s counsel indicated that they are likely to appeal the decision. If the appeal is unsuccessful, this matter will likely have a huge impact going forward, not only Uber but on many other businesses which claim to act as marketplaces in order to match service providers with others who seek to pay for those services. A number of recent decisions in this area – including a $228 million settlement between FedEx and thousands of drivers that were allegedly misclassified as independent contractors – have heightened the need for any employer which depends on independent contractors to do business to closely examine the classification of these workers.