O’Connor v. Uber: Drivers Win Cert. for Tips Claim

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On September 1, 2015, in a 68-page decision, District Court Judge Edward M. Chen of the Northern District of California certified a class of an estimated 160,000 “UberBlack, UberX, and UberSUV drivers who have driven for Uber in . . . California at any time since August 16, 2009,” and who either had not signed an arbitration provision or who had opted out of such a provision. See O’Connor, et al. v. Uber Technologies, Inc., 3:13-cv-03826 (N.D. Cal. Sept. 1, 2015) (slip opinion available here). The court held the class may pursue its claims that Uber misclassified them as independent contractors instead of employees and violated California’s Unfair Competition Law by failing to pass on to its drivers the entire amount of any tip or gratuity, in violation Cal. Labor Code section 351. Excluded from the certified class are Uber drivers who work for third-party intermediaries, those paid under a corporate name, and those who did not opt out of the arbitration provision in Uber’s most recent driver contracts.

In ruling that the working relationship between the drivers and Uber is “sufficiently similar” that their employment status can be adjudicated on a class basis, the district court applied California’s common-law test of employment, enunciated in the seminal case S.G. Borello & Sons, Inc. v. Department of Indus. Relations, 48 Cal. 3d 341 (1989). In applying the Borello test at the summary judgment stage, the court previously determined that because Uber drivers “render service to Uber,” they are presumptive employees as a matter of law. See O’Connor, 2015 WL 1069092, at *4-6, *9 (N.D. Cal. 2015). Therefore, at trial, the burden would fall on Uber to “disprove an employment relationship” by rebutting the plaintiffs’ prima facie showing of employment. Id. at *10.

To rebut the presumption of employment, Uber needed to demonstrate that the multi-factor Borello test weighs in its favor. The principal inquiry under Borello “is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Alexander v. FedEx Ground Package Sys., 765 F.3d 981, 988 (9th Cir. 2014) (quoting Borello, 48 Cal. 3d at 350). Critically for purposes of class certification, the pertinent question under California’s right-to-control test is “not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise.” Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 533 (2014) (emphases in original). Although retaining control over any one work detail is not dispositive, the “right to discharge at will, without cause,” is “strong evidence in support of an employment relationship.” Borello, 48 Cal.3d at 350; see also Ayala, 59 Cal. 4th at 531. There are also at least eight (8) other “secondary indicia” that may be relevant to the employee/independent contractor determination. Borello, 48 Cal.3d at 351 (discussed in this prior ILJ post). After an exhaustive analysis of the Borello factors, the O’Connor court concluded that, despite variations in contract and length of service, and though drivers could set their own schedules and routes, Uber retained the right to terminate them at will and without cause, to monitor and track their performance, and to set their pay unilaterally, and that all the “secondary indicia” raised common questions that would yield common answers. Slip op. at 32-54. Moreover, given the specific class definition, the court found the predominance requirement satisfied “because there are not significant material legal differences between the claims and defenses of the class members and those of the named Plaintiffs.” Id. at 19.

Arguing that there is “no typical Uber driver,” Uber argued that the plaintiffs failed to satisfy Rule 23(a)(3)’s typicality requirement by focusing on differences between drivers under the Borello test, but the court rejected that argument, finding Uber’s “no typical driver” argument to be “a commonality or predominance argument masquerading as a typicality argument.” Slip op. at 19. Moreover, the court found an “inherent tension” in Uber’s argument. Id. On the one hand, it argued that the drivers’ employment classification could not be adjudicated on a classwide basis because its right of control over drivers and the day-to-day reality of their relationship is not sufficiently uniform to satisfy the class action requirements of Federal Rule of Civil Procedure 23; on the other hand, Uber argued that it had properly (and uniformly) classified every single driver as an independent contractor. The court found Uber’s “no typical driver” argument to be focused on “legally irrelevant differences” between the named plaintiffs and class members, such as whether they received in-person or online training. Slip op. at 19. However, Uber most vigorously argued that the plaintiffs were neither typical nor adequate because of an irreconcilable conflict between the remedy they seek (establishment of an employment relationship) and the interests of “countless drivers” who “do not want to be employees and view Uber as having liberated them from traditional employment.” Slip op. at 24. In support, Uber pointed to 400 declarations, 150 of which actually stated a preference for independent contractor status. The court found the views of these 400 drivers to be “statistically insignificant” (i.e. 0.25% of the class), particularly because there was no evidence that they were randomly selected, or constituted a representative sample of the driver population, or that their responses were “free from the taint of biased questions” from the defendant’s attorneys. Id. Ultimately, the court concluded that because the plaintiffs’ legal claims all arise from essentially the same conduct by Uber underlying the claims of class members and allege that they suffered the same legal injury—i.e., their misclassification as independent contractors—the plaintiffs’ claims were typical of the class. However, the court also denied without prejudice the plaintiffs’ request to certify their expense reimbursement claims which alleged that Uber uniformly failed to reimburse its drivers for their necessary expenses in violation of Labor Code section 2802.

On September 15, 2015, Uber filed a Petition for interlocutory review of the district court’s certification decision under Rule 23(f) with the Ninth Circuit, available here. Uber casts the need for immediate review in dire economic terms, arguing that if the decision is permitted to stand, it will “effectively kill[] the sharing economy business model” on which Uber and other online software platforms operate. Hyperbole aside, if the plaintiffs prevail on the merits of their employment status claim, Uber’s business model will likely be no more, and Uber’s costs would exponentially increase beyond the scope of the damages sought by the plaintiffs in this lawsuit. Accordingly, this case will remain closely watched by both the legal and business communities.

Authored By:
Melissa Grant, Senior Counsel