Uber’s business model is on the rocks late Tuesday after a federal judge granted class-action status to a lawsuit targeting the company’s treatment of drivers as independent contractors.
The case is one of several high-profile suits brought by drivers against the technology start-up that has displaced traditional taxis in many markets. A California labor board ruled against the company in a separate but similar case earlier this summer, in an administrative decision that does not bind the courts but outlined some weaknesses in Uber’s legal argument.
Now those weaknesses will face a test with much higher stakes — though just how high is a matter of dispute. The plaintiffs wanted the court to include 160,000 drivers in the class as party to the current lawsuit alleging that drivers are full employees of Uber with full labor law protections, rather than independent contractors. Tuesday’s order places some restrictions on the class, and it’s unclear how many of those 160,000 drivers will ultimately be part of the suit. Uber believes “only a tiny fraction of the class” will be eligible, a spokesperson wrote in an email, though Tuesday’s ruling leaves the door open for arguments to expand the class.
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The cost of paying back wages and payroll taxes for the class Chen certified Tuesday, while certainly smaller than the $50 billion that the company is currently worth according to investors, would be vast — especially if plaintiffs’ attorneys accept Chen’s invitation to make further arguments about including other drivers in the class, and succeed.
And perhaps more importantly, having a giant chunk of its driver base collectively re-classified as employees would chip away at the company’s reputation for disrupting the taxicab business. Uber would start to look like any other company that hires workers to drive fares around for tips and wages under the normal protections of employment law.
This is the first step in what would be a long fight, and as Uber is likely to appeal this ruling, there’s no guarantee it would stand. As things are now, Uber drivers outside of California are not involved, so there’s nothing at stake here just yet. Still, it’s worth keeping an eye on this, because the effect if the ruling ultimately stands would be big. Slate has more, while ThinkProgress looks at the bigger picture.