September 1, 2015 – Judge Edward Chen certified a class today in O’Connor v. Uber Technologies, Inc., in which the plaintiffs claim that they, and everyone else who has driven for Uber since August 2009, was an employee of Uber, and not independent contractors. The thrust of the plaintiffs’ claims is that Uber failed to reimburse drivers for expenses they incurred in connection with their job duties (such as for gas and car maintenance) – the “Reimbursement Claim” – and failed to pay them tips received from Uber customers – the “Tips Claim.” Only employees are entitled to reimbursement and tips, so the central issue in the case is whether the drivers are employees or contractors. For now, the court has certified a class only with respect to the Tips Claim.
Common Evidence Will Be Used In Deciding Whether Drivers Are Employees
In ruling on the motion for class certification, the question before the court was whether “the drivers’ working relationships with Uber [are] sufficiently similar so that a jury can resolve the plaintiffs’ legal claims all at once.” If not, the plaintiffs’ cannot be decided on a classwide basis. Courts routinely find cases that turn on whether plaintiffs and the class members were improperly classified as independent contractors appropriate for classwide resolution. In O’Connor v. Uber, as in most cases disputing an independent contractor classification, the classification question determines the outcome: if the workers are not employees, their claims necessarily fail.
The court easily disposed of Uber’s arguments against class certification. Uber argued (among other things) that there is too much variability in its relationships with its drivers – specifically, with respect to Uber’s right to control the drivers and how they go about performing their work – to permit class treatment. The court correctly noted, however, that “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.”
In O’Connor, every factor to be examined in determining whether the drivers are employees can be decided based on common evidence. (Click here for a summary of the key factors.) For example, Uber admits that it never exercises any control over its drivers’ schedules, where they work, or the routes they take. None of the drivers negotiate with Uber to receive higher rates of pay than other drivers. And, because all of the drivers perform essentially the same task, the same level of skill is required for the job. In short, the question of whether Uber’s drivers are employees is perfectly suited to classwide resolution through common evidence.
Notably, some of these factors cut in Uber’s favor – e.g., that drivers are free to use drive for Lyft and/or Sidecar or carry on other occupations during their “shifts” (for lack of a better word) driving for Uber, and that the drivers make a significant investment by providing their own vehicles and cell phones. But which party the evidence favors on the merits is not the operative question at the class certification stage. The question is whether the relevant evidence is common across all class members. Here, it is.
But whether the independent contractor vs. employee question can be resolved by common evidence is only part of the class certification inquiry. The court next had to decide whether the plaintiffs’ substantive claims – the Reimbursement Claim and the Tips Claim – also turn on common evidence.
Reimbursement Claim Not Currently Certified for Class Treatment
At least for the time being, no class has been certified with respect to the Reimbursement Claim because “there may be substantial variance as to what kind of expenses were even incurred” by the drivers. That is, although all drivers would have incurred expenses for gas and automobile maintenance, the plaintiffs’ complaint also alleged that Uber required its drivers to provide items such as gum, mints, and bottled water for their passengers. Although the IRS mileage reimbursement rate, combined with records of how many miles each driver drove for Uber, would provide a reasonable method of calculating damages attributable to gas and wear-and-tear, the plaintiffs failed to propose any means of calculating damages related to other items. Instead, plaintiffs asserted they were “mainly” seeking reimbursement for vehicle expenses. But, as the court observed, “adequacy questions arise when plaintiffs attempt to obtain certification by waiving other categories of damages.” The court left open the possibility that plaintiffs could demonstrate that it would be in the class members’ best interests to waive claims for reimbursement of other types of expenses, for example, by showing that the car expenses far outweighed any other type of expenses.
Class Certified With Respect to Tips Claim
California Labor Code section 351 prohibits employers from “collect[ing], tak[ing], or receiv[ing] any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.” According to the court, ruling on this claim involves two issues: Determining Uber’s liability under section 351 will require the jury to consider two issues: First, did Uber “collect, take, or receive” a “gratuity” from its riders? Second, if Uber did collect a gratuity, did it pay the full amount of the tip to its drivers?
There is no doubt that these issues can be decided on common proof. Notwithstanding “extensive” evidence provided by plaintiffs that Uber advertised to consumers that a tip is included in the fares charged through the app, Uber stipulated that “a tip has never been part of the calculation of fares for either UberBlack or UberX in California.” Clearly, if Uber never calculated a tip, it never segregated the tip amount or paid that amount to drivers.
According to the court, “these facts, if proven at trial, will likely establish Uber’s uniform and classwide liability for violating California’s Tips Law.” But this overlooks a significant preliminary question: whether some unidentified portion of the fare charged by Uber can really be characterized as a “tip” or “gratuity.” Uber has never given riders the ability to change the amount of the purportedly “included” tip. In the court’s words, “if one credits the plaintiffs’ evidence, Uber tells riders that some unspecified tip is being unilaterally imposed by Uber, and riders have no power to change this amount for any reason. Because the tip is unilaterally set by Uber without any possible input from riders, there is no reason to suspect that the ‘included tip’ amount would vary from ride-to-ride based on driver performance or any other factor. A poor performing Uber driver would receive the exact same tip as a high-performing driver because Uber has never given riders the ability to actually vary the tip amount it charges them.“
The mandatory nature of the charge, combined with the riders’ inability to change the amount of the alleged tip, is flatly inconsistent with common understandings of the meaning of “tip” and “gratuity” – which involve an amount over and above the charge for the good or service received, voluntarily given by a customer. (See here, here, and here, for example.) More importantly, California’s Labor Commissioner has consistently taken the position that a mandatory service charge is not a tip or gratuity.
Assuming that plaintiffs’ evidence of Uber’s representations to consumers that a tip is included in the fare is to be believed, Uber may find itself in the undoubtedly odd position of defending against the Tips Claim by admitting that the company misled consumers about collecting tips. Despite the inherent weirdness of a company defending itself from a wage claim by arguing that it misled the public, this appears to be a low-risk strategy for Uber (setting aside the potential for fines or orders for “corrective advertising from the Federal Trade Commission and/or the California Department of Public Affiars – a topic far beyond the scope of this post). Who could sue Uber for false advertising or similar claims, and what would their damages be? Typically, the damages in such a case would be the difference in the amount the consumer paid for the service provided and the amount he or she would have paid a company that did not make the false claims. Here, at least arguably, a consumer who wanted to tip a driver would have ended up paying more for the service… Even if someone were to sue on this basis hoping for an award of attorneys’ fees, Uber could quickly offer a settlement and minimize the potential fees – for far less than the potential exposure on the Tips Claim.
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