Uber Drivers Misclassification Trial

Executive Summary

Purpose:  Research the ongoing class action suit in the US District Court of California against Uber Technologies, Inc brought forth by Uber Drivers, Douglas O’Connor, et al.  The issue set forth in this case is whether or not Uber drivers are being misclassified as independent contractors.  This paper is intended to present the facts of the case and the laws that apply therein. It will explain the arguments for and against Uber Technologies.  Lastly, I will offer my opinion on where I stand in the matter and why.

Summary:

Uber Technologies, Inc offers a mobile application for the purpose of connecting people, who are looking for rides, with nearby Uber drivers. The whole transaction of requesting the ride, tracking the Uber drivers route, paying and tipping can all be done on the customers mobile device with the Uber app.  

The plaintiffs Douglas O’Connor, Thomas Colopy, Matthew Manahan, and Elie Gurfinkel are current or former drivers of Uber Technologies and present this lawsuit on behalf of themselves and a class of roughly 160,000 other drivers.  They allege that they have been misclassified as ‘independent contractors’ when they should have been labeled as ‘employees.’  This classification prevents them from being eligible for various employee protections.

Uber Technologies, on the other hand, is fighting back alleging that they are not a “transportation company” but rather a “technology platform” and therefore these drivers are simply customers of Uber.  Uber states that the individuals that drive for them have much flexibility and “control” over their schedules and how they operate. Uber claims that their drivers prefer this type of flexibility as an independent driver and don’t want anything to change.

In my opinion, based on the amount of “control” Uber Technologies has over Uber drivers, I would agree with Douglas O’Connor, et al. that this is an employer-employee relationship.

Uber Technologies, Inc Background:

Uber Technologies, Inc. offers a mobile app for smartphones for the purpose of connecting drivers with people looking for rides.  Customers can download the app to their mobile phone and request a driver to pick them up at point A and drive them to point B.  The app finds out roughly what the trip will cost before the customer accepts. It then alerts the nearest Uber driver who then chooses whether to accept the request.  The app is able to show the customer, on their smartphone, a map of the location of the Uber driver in route to the customers location. The Uber app eliminates the physical exchange of payment to the driver and allows customers to pay on their mobile device via credit card.  Uber advertises that tips are included in the price and therefore customers do not actually tip Uber drivers.  The company takes a 20% cut of the money made by drivers to generate revenue.  Uber lists several benefits to utilizing their service; high quality service, fair pricing, ease of use.  

The company was founded in 2009 by Garrett Camp and Travis Kalanickand under the name UberCab based in San Francisco, California.  On July 5, 2010, Ubercab “went live” with its concept for the first time operating in San Francisco.  Shortly after, concerns started to rumble regarding whether UberCabs business was actually legal in the city of San Francisco.  Despite the questionable practice, in October of 2010, Uber closed a $1.25 million angel investment led by First Round. Within days, The San Francisco Metro Transit Authority & Public Utilities Commission of California issued a ‘cease and desist’ order for operating like a cab company but without proper charter carrier permits and license requirements.  Despite the cease-and-desist order, CEO at the time, Ryan Graves said his company never shut down or stopped service. Instead, they addressed each of the violations, beginning with the obvious company name change. In San Francisco, only permitted taxis can advertise themselves as taxis or cabs, including having those words in the company name. Hence, they changed the name from UberCab to just Uber.  This was just the beginning of many more legal roadblocks to come for Uber as they aim for global domination.  

In this paper, I take a deeper look at the legal issues surrounding Uber Technologies and its drivers. The legal issue in question is whether or not Uber drivers, in the state of California, should be considered employees or independent contractors.  Currently, they are labeled as the latter.  I research the specific ongoing case of Douglas O’Connor, et al, vs Uber Technologies, Inc., et al. Case No. CV 13-3826-EMC. I examine the case facts, present the positions of both sides of the legal issue and lastly present my opinion on the matter.  

It seems that controversy follows Uber wherever they go, which is everywhere.  Since 2009, Uber has expanded dramatically to serve over 300 cities across the globe in 68 countries.  Since then, they have been in the spotlight on several occasions for questionable business practices.  Issues aplenty ranging from surge pricing during high volume times, lack of stern customer privacy policies, lack of thorough driver background checks, sexual harassment allegations against multiple drivers, etc.  Most recently in California, Uber is facing a class action law suit regarding driver employment classification of employee versus independent contractor. Uber drivers in California have filed a class action lawsuit claiming they have been misclassified as independent contractors and therefor have been required to cover their own business expenses, such as the cost of their vehicles, gas, and maintenance.  (DOUGLAS O’CONNOR, et al., Plaintiff vs. UBER TECHNOLOGIES, INC., Defendant. Case No. CV 13-3826-EMC) The allegations also include an issue of gratuity.  Uber drivers currently do not receive the total proceeds of the tips customers are paying which they claim is against California Gratuities Law.[6]  Uber is fighting back stating they are merely a technology platform, and its drivers have made agreements with a mobile application. As such, this agreement should not be seen as an employment contract. Uber also argues that they have no “right of control” over their drivers.

Employee vs Independent contractors

In writing this paper, I revisited the content of what we studied in week 3 of this course. During that week, we studied Employer-Employee relationships in comparison with Employer-Independent Contractor relationships.  Our assignment was to present a memorandum to Jesse on whether he should hire employees or Independent contractors for his start up company, Next Great Thing, and what the impact would be for each scenario.  Normally, all employees who deal with third parties are deemed to be agents. [8] Section 1(1) of the Restatement (Third) of Agency defines agency as “the fiduciary relation that results from the manifestation of consent by one person to another that the other shall act in his or her behalf and subject to his or her control, and consent by the other so to act.  Section 2 of the Restatement (Third) of Agency defines independent contractors as a person who contracts with another to do something for him or her but who is not controlled by the other nor subject to the others right to control with respect to his or her physical conduct in the performance of the undertaking.  He or she may or may not be an agent. [8] How someone is classified will have significant impact on a company and the individuals working for them.