Compensation & BenefitsPublications

Uber Drivers Win Class Certification in Closely Watched Misclassification Case

September 2, 2015Articles

A federal judge in California has ruled that Uber drivers in the state can sue the mobile car service provider as a class for denying them the full benefits of employment.

From its inception, Uber has considered the drivers who use its platform to be independent contractors. But four drivers who brought this suit under the Fair Labor Standards Act and California law say that they, along with nearly 160,000 of their peers, are retroactively due additional pay and vehicle expense reimbursement because they should have been classified as employees. Judge Edward Chen concluded in his ruling that the employment situation of Uber drivers is “sufficiently similar” that his court can weigh whether they are truly employees en masse. The Judge did narrow the proposed class somewhat holding that only those drivers who worked for the company directly between August 2009 and June 2014 should be included. Uber estimates the number of eligible drivers at less than 15,000, and “only a few hundred” who are still active on their platform.

The company has said in the past that many if not most of its drivers use their platform in ways that aren’t akin to full employment, either for less than 15 hours a week or in concert with other driving platforms such as Lyft. But Judge Chen found a contradiction in Uber’s positions:

According to Uber, both its right of control over its drivers, as well as the day-today reality of its relationship with them, are not sufficiently uniform across the proposed class to satisfy the requirements…[H]owever, there is inherent tension between this argument and Uber’s position on the merits: on one hand, Uber argues that it has properly classified every single driver as an independent contractor; on the other, Uber argues that individual issues with respect to each driver’s ‘unique’ relationship with Uber so predominate that this Court (unlike, apparently, Uber itself) cannot make a classwide determination of its drivers’ proper job classification. .. It appears that at least one of these arguments cannot be entirely accurate, and for the purposes of resolving this motion the Court concludes that a number of Uber’s class certification arguments are problematic.

If the drivers ultimately prevail in the lawsuit, Uber would likely to have to begin paying additional benefits and obeying stricter labor rules. However, the upfront costs alone could be significant as is evidenced by a recent $228 million settlement involving FedEx and thousands of individuals it allegedly misclassified as independent contractors. Approval for the FedEx settlement is now pending approval before Judge Chen as well.

These cases, in combination with the Department of Labor’s (DOL) recent Administrator’s Interpretation regarding the identification of employees who are misclassified as independent contractors, make it critical for employers who are dependent on the labor of independent contractors to review the appropriateness of such classifications. As Dr. David Weil points out in the Administrator’s Interpretation, “most workers are employees under the FLSA’s broad definitions.” Taking a proactive approach to worker classification can help companies minimize the risk that they have should a DOL audit take place or employees seek to bring individual or representative actions against the company.

For more information on how this may impact you, please contact a Dinsmore attorney.