Uber Ordered to Face Class Action Over Employee Status

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By Joel Rosenblatt

Sept. 1 — Uber Technologies Inc. will have to defend a group lawsuit brought by drivers seeking the pay and benefits of employees, a federal judge in California ruled Sept. 1.

The ruling by the U.S. District Court for the Northern District of California could affect drivers around the country, even though the San Francisco case is limited to 160,000 drivers in California.

Changing drivers' status would entitle them to unemployment and workers' compensation as well as the right to be represented by a union. Tuesday's federal court ruling means Uber's California drivers can, as a group, press the central claim of the case, that they can seek reimbursement for mileage and tips. Other courts in the U.S. will likely look to Judge Edward Chen's reasoning in evaluating other such challenges, employment specialists said.

The ruling is “a very big deal,” said Beth A. Ross, an employment lawyer who won a similar case against FedEx Corp. “The question in this case is whether Uber's business model is lawful or unlawful. If that question gets to be decided on a class-wide basis, that's the whole ball game,” Ross said before the decision was issued.

In the FedEx misclassification case brought by its drivers, a class action, the company agreed to a $228 million settlement that is being considered by Chen.

'Worth a Fortune'

Uber's financial exposure as a result of Chen's ruling is significant because the mileage and tip claims “are worth a fortune,” Ross said. “The dollars add up really, really fast,” she said, noting that the 2,000 drivers in the FedEx case pale in comparison to about 160,000 in Uber's.

An important factor in determining whether the case could proceed was a determination that Uber exercises control over its drivers.

“Uber's uniform and unilateral right to control its drivers' compensation is important common proof that bears directly on the class members' work status,” Chen wrote.

Chen allowed the plaintiffs to pursue reimbursement for expenses including mileage by filing further arguments within 35 days.

—With assistance from Eric Newcomer in San Francisco

For more information, see Compensation and Benefits Library’s Fair Labor Standards Act: General Principles chapter.

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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