Drivers file misclassification class action, seek unpaid tips and aggressively attack class action waiver in arbitration agreement

Published on

Uber is no longer just a German superlative; it is now also a high-end car service. Founded in San Francisco in 2009 as a small start-up, the company has already expanded to twenty-two metropolitan areas across the country, and twenty cities in Canada, the Middle East, Africa, Asia, and Europe. Last year, it began operating about ninety cars in London. Its rapid growth will come as no surprise to anyone who has suffered the indignity of trying for what seems like an eternity to hail a taxi on a busy city street, only to be picked up eventually by a surly, chain-smoking cab driver with a sure nose for the longest possible route to your destination. Ubers cars—sleek limousines, BMWs, Jaguars, and Mercedes sedans—are summoned by customers through a cell-phone app and usually show up within minutes, driven by well-dressed, chauffeur-like drivers. Inside the car’s whisper-quiet interior, soft music plays and a fresh bottle of water awaits you. When you arrive at your destination, there is no fumbling for cash to pay the driver; payment is made electronically through the app. Even if the route is the same one that the taxi would have taken and costs no less, who cares; you’ve been treated like a VIP. . So it will also come as no surprise that many taxi companies, as well as the cities that generate revenue by granting taxis exclusive licenses to operate within their borders want to see Uber shut down.

On November 9, 2012, taxi drivers in San Francisco filed a class action lawsuit against the company for unfair competition. That suit alleges that Uber’s drivers aren’t licensed as a limousine service or a taxi company and that partnering with “unauthorized and unpermitted drivers” enables it to “unlawfully compete and take fares from law-abiding taxicab drivers.” It alleges also that Uber acted to cover up its true nature (i.e., that is, in essence, a taxi company, albeit an “uber”-fancy one) in order to avoid regulation governing taxicab companies and is “intentionally interfering with the drivers’ relationship with the public through their illegal acts.”

At the same time, Uber was being investigated by the California Public Utilities Commission and the San Francisco Municipal Transportation Agency, resulting in a state-issued cease and desist order (though that order has since been suspended pending a state regulatory process). This past April, the San Francisco International Airport issued a cease and desist letter to Uber, among others, concerning allegedly unregulated community drivers.

And earlier last year, the Washington, D.C. City Council was contemplating a so-called “Uber Amendment” to the city’s municipal code that would have forced the company to charge at least five times the price of a normal taxicab fare. That proposal was shelved last July.

But Uber’s troubles are no longer limited to their competition and government agencies. Their new troubles come from their own drivers. On August 16, two Uber drivers filed a 16-page class action lawsuit against the company, alleging that they receive only a portion of each gratuity (if any is charged to the customer) and therefore don't receive the tips that would be customary for livery operators. The suit also alleges that some drivers have been misclassified as independent contractors, and have therefore been forced to pay for vehicle expenses that should be covered or reimbursed by the company.

In order to bring their class action suit, the drivers have also challenged their contract's arbitration agreement, which was modified this past July to add a class action waiver (not sure what took them so long to implement one). To accept this arbitration agreement, drivers simply tap a button on a smartphone. In contrast, to opt out of the arbitration agreement, papers filed in the lawsuit state, "drivers must send written notice to Uber's General Counsel that they are opting-out through personal delivery or overnight delivery service."

To combat the class action waiver in the arbitration clause, plaintiffs' counsel is getting the word out to Uber drivers to hand-deliver a letter to Uber's general counsel in San Francisco opting out of the arbitration agreement.

On August 21, before serving the Summons and Complaint on Uber, the plaintiff drivers sought an emergency protective order to preemptively invalidate the class action waiver on the ground that the means for opting out of the arbitration agreement are more onerous than the means of accepting it. Two days later, the court denied the drivers’ emergency motion because Uber hadn’t yet been served with the lawsuit; until the company was served, the judge ruled, the court had no authority to grant declaratory relief or restrict communications between Uber and putative class members.

The drivers renewed their emergency motion on Monday, August 26, representing that they have now served Uber with the Summons and Complaint. Uber's response is due on September 9.

The drivers’ preliminary motion presents some novel issues, and it will be interesting to see how the court decides them. Will the court approve the drivers’ bid to forestall Uber’s communications with its employees or contractors long enough for the plaintiffs and their lawyers to educate the putative class members to preempt application of the arbitration provision? And how will the court rule on the validity of the easy electronic acceptance, and allegedly more onerous opting out, of the class-action waiver? If the plaintiffs get past these hurdles and their lawsuit moves forward, this case may also test the application of California's wage and hour laws to new technologies and business models.

Stay tuned.