By the time a class-action misclassification lawsuit in California reaches an outcome, Uber might not have any drivers to reclassify
The class-action lawsuit Uber is facing in California, which claims the company misclassified its drivers as independent contractors, threatens the core of its business model. If Uber were to hire its drivers as employees, it would be responsible for paying into Social Security, Medicare, unemployment insurance, and workers compensation insurance on their behalf, and it would lose some of its flexibility to expand and contract its workforce to meet demand. A recent napkin estimate from Fortune guessed that it would cost the company an additional $4.1 billion per year to switch all of its drivers from contractors to employees. (Though the current case applies only to California, it could be instructive in other states.)
In addition to Uber, the decision could impact the viability of companies like Postmates, Lyft, and other gig-economy companies that supply services by doling out jobs, gig by gig, to an army of freelancers. As an Uber lawyer recently put it in a court filing, this is “the leading case raising urgent questions about the classification of sharing-economy workers.”
Self-driving cars wouldn’t reduce damages if Uber were to lose the case. But the threat to Uber’s model would be much less threatening if it were no longer relying on labor. That could happen more quickly than you’d think. Last week, Toyota joined Nissan, General Motors, and Google in estimating that it will have self-driving cars on the road by 2020. Elon Musk, whose company Tesla is also working on self-driving cars, predicted last week that we’d be handing over the wheel to a computer within the next two or three years.
Meanwhile, the class-action lawsuit against Uber, filed in 2013, has two years later just been granted class certification on the plaintiffs’ claim that Uber failed to pass on tips to drivers. It denied class certification on the plaintiffs’ other claim, but gave them the opportunity to file a supplemental brief on that claim, and even the class certification it did grant could still change—more on that later.
The relative speed of self-driving car technology—which at Google, has already been tested for 1 million miles—and the notorious slowness of court proceedings made me wonder: Can Uber just wait this out? Is there any chance that by the time a conclusion is actually reached, Uber will already have self-driving cars on the road?
At first, this idea was a joke. Then I started to talk with labor lawyers.
How long for a decision in the Uber misclassification case? “I think you’re looking at years,” says Gail Gottehrer, a labor and employment litigator at Axinn Veltrop & Harkrider, whose practice focuses on class action defense, privacy and technology litigation, and digital workplace-related actions.
Here’s what would need to happen before Uber would be forced to pay its drivers should a class-action lawsuit decide they were employees:
In September, a federal judge granted one claim in the lawsuit, that Uber failed to pass on tips to drivers, class status. Uber filed for permission to appeal that decision (typically it would wait until after the completion of the case to appeal the class certification decision). If Uber loses the right to appeal the class certification, it will not be able to appeal the decision until the entire case is concluded. “A decision on an appeal filed after a jury verdict in the case could take up to two years,” says Gottehrer.
If Uber wins the right to appeal the decision about class action, the appeal of the decision certifying the tips claim will proceed in that court, which could take between six months and a year. If Uber loses the appeal, the case will go back to the district court, where the trial will take place. Whichever way the court decides, there will likely be another appeals process.
So, 2020? It’s not necessarily likely that the decision would take that long, but it wouldn’t be a total stretch. “I don’t see it going until 2020,” says Diane Wagner Katzen of Richman Greer. “But you never know what happens.”
Counting on a slow judicial process isn’t the only way to put off a payout. Uber could also settle with the drivers, as a class. “What ordinarily happens is that the parties come to a settlement agreement, agree on a class, and to make it as broad as possible, so that it includes as many people as possible, so a company can take care of the problem,” says Larry A. Kellogg, a partner at Levine Kellogg Lehman Schneider + Grossman who specializes in class-action litigation on both the defense and plaintiffs’ side.
A settlement would also avoid a court decision, which is important, because though it would only apply to California, it could be persuasive in misclassification lawsuits everywhere. “The 9th circuit is a very influential, respected judicial body,” Katzen says. “And so clearly, other courts will be citing any decision by this court.”
“If you want my prediction,” Kellog says, “it will be resolved by settlement.”
But as Uber ramps up its efforts around self-driving cars—it recently opened a major research center in Pittsburgh and announced a partnership with the University of Arizona with hopes of developing better technology—there’s some possibility that technology could resolve the debate about how to classify future workers first.
Source: Fast Company, Sarah Kessler
Sarah Kessler is a reporter at Fast Company, where she writes about technology companies and the people they impact.
Photo: Uber Corporate Headquarters