There’s been a key development in a case that threatens Uber’s business model.
Uber drivers are now entitled to class action status in litigation over whether they are independent contractors or employees.
Basically, some Uber drivers are sick of expenses like gas and maintenance coming out of their pockets. Three drivers sued the company in a federal court in San Francisco, claiming that they’re employees and therefore entitled to reimbursement for expenses.
The legal battle could mean major changes for the whole idea of the sharing economy, which is currently built around Internet companies that serve as marketplaces, matching people who provide a service with others looking to pay for it.
In yesterday’s ruling, U.S. District Judge Edward Chen in San Francisco said California drivers could sue as a group on the question of whether they are employees or contractors, in addition to a demand for tip payments never received. As for reimbursement of other expenses, drivers’ attorneys must submit more evidence to sue as a group.
Chen also said drivers who’ve worked for the company since May 2014 must specifically opt out of an arbitration agreement in order to sue the company.
In a statement, Uber said it will appeal, but that the arbitration portion of Chen’s ruling means a “tiny fraction” of a potential 160,000 California drivers are eligible to be class members. Furthermore, one of the three suing drivers is no longer eligible to represent the class, according to Uber.
Even so, Shannon Liss-Riordan, a lawyer who represents drivers in the case, said that “many thousands” of drivers will actually be part of the lawsuit.
Prior to the lawsuit decision, Uber had claimed that drivers should be forbidden to sue as a group because they relate to the company in different ways and have little in common.
Of course, if Uber drivers are found to be employees, this would raise the company’s costs significantly, especially if they’re forced to pay Social Security, workers’ compensation, and unemployment insurance.
One thing’s for sure: the rise of on-demand companies like Uber raises interesting questions (and heated debates) when it comes to the future of the workforce and workplace protection.