Can Uber Claim its Drivers are Independent Contractors?
That is the question being answered in the action entitled O’Connor, et al. v. Uber Technologies, Inc., currently pending in the United States District Court for the Northern District of California, Case No CV 13-3826-EMC. According to the Second Amended Class Action Complaint, plaintiffs allege, among other things, that Uber Technologies, Inc. (“Uber”), although advertising that a gratuity is included in the price of their services, has never given such gratuities to their drivers, thus violating California’s Unfair Competition Law (California Business and Professions Code Section 17200, et seq.) and that they have been “misclassified as independent contractors and thereby required to pay business expenses (such as for their vehicles, gas, and maintenance) in violation of California Labor Code Section2802.” See paragraph 2, Second Amended Class Action Complaint. Trial is expected to begin on June 20, 2016.
California Labor Code Section 2802 provides that an “employer” is required “to indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.” If the driver plaintiffs are correct in their assertions that they are employees, rather than independent contractors, Uber could be ordered to pay for all of the expenses paid by their drivers thus far, including, expenses related to fuel, insurance, maintenance, and a whole host of other expenses.
Although Uber denies all of the allegations of the Second Amended Class Action Complaint, only two days after Judge Edward M. Chen, the Judge overseeing the O’Connor matter issued the Court’s Class Certification Order on December 9, 2015, Uber sent all of their US-based drivers a twenty-one page agreement they were required to sign before being allowed to continue driving for Uber. The agreement includes a “lengthy provision requiring mandatory arbitration starting on page 15 and flagged on the first page.” Uber Bans Drivers From Class-Action Lawsuit Participation, Carolyn Said, San Francisco Chronicle, Dec. 14, 2015, govtech.com. Uber has now been prohibited from communicating with the drivers regarding the O’Connor matter without first communicating with their attorney or the Court. Judge knocks Uber over latest attempt to bar drivers from class-actions, Cyrus Farivar, arstechnica.com, Dec. 18, 2015.
In California many of the attributes the IRS looks to in determining whether a worker is classified as an independent contractor or employee are used by the courts for the same purpose. (See What Factors Does the IRS Look at to Determine Independent Contractor Status.)
As the O’Connor matter highlights, the determination of whether someone is an independent contractor or employee can be complex and involves consideration of many factors. To understand the rules and make an informed decision about classifying a worker, you need the services of a knowledgeable attorney. Michael Leonard, Esq. of San Diego Corporate Law is that attorney. To schedule a consultation with Mr. Leonard to discuss whether a particular person is an independent contractor or employee, or to discuss any other business-related matter, you can contact him by visiting San Diego Corporate Law or by telephone at (858) 483-9200.