The case, known as O’Connor v. Uber, represents a major landmark in a rising tide of legal decisions and ongoing litigation in the so-called "sharing economy." The four drivers are seeking to push Uber to recognize the service's workers as employees rather than contractors.
"It's a big step in this litigation, certifying this class," Miriam Cherry, a labor law professor at Saint Louis University, told Ars. "I knew this case was a big one. This case is going to have a major effect on not just Uber but all these businesses and business models.
If Uber drivers were classified as employees rather than contractors, they would be entitled to a number of benefits under federal law. Those perks would include things like unemployment benefits, workers’ compensation, the right to unionize, and most importantly the right to seek reimbursement for mileage and tips. If a jury were eventually to find against Uber in O'Connor, it would significantly curb the company’s potential future earnings and its reported $50 billion valuation.
In a prepared statement, Uber spokesperson Jessica Santillo told Ars, "While we are not surprised by this Court's ruling, we are pleased that it has decided to certify only a tiny fraction of the class that the plaintiffs were seeking." She added the company would appeal this ruling.
Recent history may be on the side of the Uber drivers. In July 2015, the on-demand home cleaning service Homejoy shuttered its doors in the face of similar lawsuits. And the previous month, the California Labor Commission ruled in favor of a former Uber driver, finding that she was in fact an employee rather than a contractor. (Uber has since appealed that decision.)Belief versus reality
On the federal level, the Fair Labor Standards Act (FLSA) of 1938 is the governing body of law that dictates who is and isn’t an employee. This document has some overriding principles, and California has a similar corresponding state law.
"Key to note, according to the court, while Uber drivers believed that they were independent contractors, they came to this belief because Uber told them so," Michael LeRoy, a professor of labor law at the University of Illinois, told Ars by e-mail. "Under California law, what an individual believes about his or her work relationship to a parent organization does not negate the economic realities of work control exercised by the organization."
Byron Goldstein, who represents plaintiffs in an ongoing case against Homejoy, said that the Uber case is indicative of the industry as a whole.
"Yes, many sharing economy companies have a uniform misclassification policy. This decision demonstrates that this uniform policy is especially appropriate for class certification," he e-mailed Ars. "Companies should realize that they need to confront this issue and decide whether they want actual independent contractors or employees."
On the Uber side, one of the company's primary arguments against class certification was that there is "no typical Uber driver." But United States District Judge Edward Chen didn’t buy it. As he wrote in his 68-page ruling, issued on Tuesday:
Judge Chen also smashed Uber’s argument that if the class was certified, it would run counter to the interests of hundreds of drivers who want to be "liberated" from "traditional employment." Uber previously told Ars that its drivers want to be independent and enjoy the flexibility according to a study that the company commissioned earlier this year.First, to the extent that Uber’s "no typical Uber driver" contention is focused on legally relevant differences between drivers under the Borello test (e.g., whether or not they operate a distinct transportation business), the argument is really a commonality or predominance argument masquerading as a typicality argument: If legally material differences between class members are so substantial that the predominance or commonality tests cannot be satisfied, then the typicality test likely cannot be satisfied either. As discussed below, however, the Court finds that the predominance test is satisfied with respect to the specific class defined above because there are not significant material legal differences between the claims and defenses of the class members and those of the named Plaintiffs.
"Eighty-seven percent of drivers say the main reason to use Uber is because they love being their own boss," Jessica Santillo wrote to Ars in July 2015. "And like the vast majority of independent contractors in the US, 73 percent of Uber partners say they would rather have a job where they choose their own schedule and are their own boss than a steady 9-5 job with some benefits and a set salary."
However, upon further inspection, the methodology of this survey does not specifically state that it is a truly random sample of Uber drivers. It also doesn't reveal how many Uber drivers exist nationwide. The study simply says that 601 interviews were conducted of drivers in various cities around the country.
Santillo reiterated the findings to Ars on Tuesday, but she did not respond to Ars’ offer to confirm these findings by commissioning an independent, rigorous, and scientifically-accurate survey of all Uber drivers. Judge Chen dissected the study as such:
This type of labor dispute isn’t unique to tech companies. Many labor law experts pointed to several years worth of employee versus contractor disputes between FedEx and its drivers, nearly all of whom remain independent contractors. In August 2014, the 9th Circuit Court of Appeals reversed a lower court ruling, finding that FedEx drivers in California and Oregon were in fact employees. (Since 2011, FedEx has changed its hiring model in this region.)First, while Uber claims that "countless drivers" hail the firm as a "liberator" from traditional employment, Uber has only submitted evidence of the beliefs of a small fraction of its California drivers: 400 out of 160,000 (i.e., 0.25 percent). Notably, even out of these 400 declarations, Uber identified only about 150 where the driver actually stated that she prefers to remain an independent contractor. See Evangelis Decl., Ex. 10 (chart listing roughly 150 "Drivers Who Want To Be Treated As Independent Contractors With Uber"). There is simply no basis in the record supporting Uber’s claim that some innumerable legion of drivers prefer to remain independent contractors rather than become employees.
Moreover, not only are the expressed views of these 400 drivers a statistically insignificant sample of the views of their fellow drivers and class members, there is nothing to suggest (and Uber does not contend) that these 400 drivers were randomly selected and constitute a representative sample of the driver population. Nor is there evidence that the responses of these drivers were free from the taint of biased questions. Nothing suggests, for instance, that they were told that were the Plaintiffs to prevail, they might be entitled to thousands of dollars.
The same judge is still considering a $228 million settlement in the FedEx case that would affect 2,000 drivers. The Uber case could affect many more.
UPDATE Wednesday 12:46pm CT: Abby Horrigan, Uber's managing counsel, responded in a Tuesday evening blog post.
"So the class moving forward will be significantly less than 160,000," she wrote. "Indeed our early estimates show that the potential class is fewer than 15,000 drivers—that’s less than 10 percent of the total. And there is a chance that this number will fall further depending on the outcome of the appeal in another case—Gillette v. Uber Technologies, Inc."
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