Update regarding Uber Drivers – Litigation over Employment Status averted by Settlement

In the Fall 2015 issue of our newsletter included an article about Uber, and how it classifies drivers providing services using its online “service on demand” platform. As reported in that article, the California Labor Commissioner’s Office, following an administrative hearing in Berwick v. Uber Technologies, Inc., rejected Uber’s position that the drivers were independent contractors, and found instead that they are employees. Although Uber appealed the case to the California Superior Court, the question argued before the court was not whether the plaintiff was an employee but whether an agreement she signed with Uber required her to submit her dispute to arbitration. The trial court decided that question against Uber, and the matter is now pending before a First District Appellate Court.

The Berwick case was one of many closely watched cases on the issue of the employment status of Uber drivers. Just this past April, a settlement was reached in O’Connor, et al. v. Uber Technologies, Inc., a class action case in which plaintiffs similarly alleged that Uber had misclassified them as independent contractors. The settlement agreement, which was submitted for approval to the federal district court in San Francisco, averted a trial that was scheduled to go forward in June. Under the agreement, Uber will pay $100 million to settle independent contractor misclassification claims in California and Massachusetts. In addition, Uber has agreed to make the following changes to the terms and conditions under which persons provide driver services using Uber’s platform:

  • Uber will no longer be able to “deactivate” drivers (i.e., remove drivers from Uber’s platform) at will; instead, drivers may only be terminated for sufficient cause. Also, drivers will receive warnings in most instances and will be provided an opportunity to correct any issues prior to deactivation.
  • Drivers will not be subject to deactivation for low or negative ratings from customers.
  • Uber will institute internal appeal panels, made of “highly rated” drivers, so that drivers who believe they have been unjustly terminated may bring their concerns to a panel of their peers.
  • Drivers who are not satisfied with the result of these internal appeals can bring their claims to a neutral arbitrator, at Uber’s expense, to determine if there was sufficient cause for the deactivation.
  • Uber will institute an internal escalation process for disputes regarding drivers’ pay.
  • Uber will facilitate and recognize the formation of a Driver Association, which will have leaders elected by fellow Uber drivers, who will be able to bring drivers’ concerns to Uber management, which will engage in good faith about the driver concerns.
  • Uber will make clear to riders that tips are not included in Uber’s fares. Drivers will be permitted to put small signs in their cars stating that “tips are not included, they are not required, but they would be appreciated.” (It remains unclear under the settlement agreement whether the passengers will be able to tip via the Uber application.)

Further details regarding the settlement are available by accessing the following “Uber Lawsuit” link: http://uberlawsuit.com/. If the settlement in O’Connor is approved by the court, it will leave unresolved by any court whether Uber drivers are employees or independent contractors. And, there is one component of the settlement that potentially conflicts with the federal labor policy under the National Labor Relations Act (“NLRA”). Under the NLRA, employees have a federally protected right to vote on the question of whether they desire to be represented by a labor organization to bargain on their behalf over wages, hours and “other terms and conditions of employment.” The National Labor Relations Board (“NLRB”) is the federal agency vested with exclusive jurisdiction to process “bargaining unit” petitions filed by employees who wish to initiate that voting process. The “Drivers Association” that has been established under the terms of the O’Connor settlement appears to bear characteristics of a labor organization, so there is an argument that the settlement agreement has conferred “bargaining representative” status on the Drivers Association without the opportunity for Uber drivers to vote on that issue under the procedures administered by the NLRB. Of course, the merits of this argument will turn on the very question that was presented in O’Connor and mooted by the settlement – whether Uber drivers are employees or independent contractors.

The O’Connor case has caused many similarly situated companies to look carefully at the economic consequences of taking the independent contractor/employee issue on in the courts, and instead to classify their workers as employees with all the protections that accompany that classification. We will continue to monitor developments in this and other similar cases.

Jonathan Turner is a partner in the Los Angeles office of Mitchell Silberberg & Knupp LLP. A significant portion of his practice is in the motion picture industry, where he has represented studios and other employers in labor arbitrations, administrative proceedings, court litigation, union avoidance issues, and collective bargaining negotiations. For more info about Jonathan, click here.

  1. Uber Technologies, Inc. v. Berwick, 15-546378, Superior Court of California, County of San Francisco.
  2. Berwick v. Uber Technologies, Inc., A146460, (California Court of Appeal, 1st District).
  3. O’Connor v. Uber Technologies, Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco).
  4. Further details regarding the settlement are available by accessing the following “Uber Lawsuit” link: http://uberlawsuit.com/ . It remains unclear whether the passengers will be able to tip via the Uber application.
  5. 29 U.S.C. sections 151, et seq.
  6. 29 U.S.C. sections 157, 159.
  7. Kindred Nursing Ctrs. E., LLC v. NLRB, 727 F.3d 552, 558-59 (6th Cir. 2013) (the NLRB has exclusive jurisdiction to make bargaining unit determinations subject only to judicial review in the court of appeals).
  8. The NLRA defines a labor organization broadly as “any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment or conditions of work.” 29 U.S.C. § 152(5). See Electromation Inc., 309 N.L.R.B. No. 163 (1992), aff’d, Electromation Inc. v. NLRB, 35 F.3d 1148 (7th Cir. 1994).
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