Uber drivers granted class action status in lawsuit over employment

Uber's office headquarters in San Francisco./ AP

(Reuters) — Uber drivers are entitled to class action status in litigation over whether they are independent contractors or employees, a U.S. judge ruled on Tuesday, in a case that could have wide implications for the sharing economy.

Three drivers sued Uber in a federal court in San Francisco, contending they are employees and entitled to reimbursement for expenses, including gas and vehicle maintenance. The drivers currently pay those costs themselves.

In the ruling, U.S. District Judge Edward Chen in San Francisco said drivers could sue as a group on the question of whether they are employees or contractors, and over their demand for payment of tips that were not passed on to them. Drivers' attorneys must submit more evidence to sue as a group for reimbursement of other expenses.

Class action status means the 2013 suit could cover more than 160,000 California drivers, according to court filings, and could give plaintiffs more leverage to negotiate a settlement.

Uber had argued that the drivers should not be allowed to sue as a group because they have little in common and relate to the company in different ways.

However, Judge Chen wrote that there is an "inherent tension" in Uber's argument.

"On one hand, Uber argues that it has properly classified every single driver as an independent contractor," Judge Chen wrote.

On the other, Judge Chen wrote, Uber argues that individual drivers are so unique that the court, "unlike, apparently, Uber itself," cannot make its own determination.

Representatives for Uber and the drivers could not immediately be reached for comment.

The results of Uber's legal battle could reshape the sharing economy, as companies say the contractor model allows for flexibility that many see as important to their success.

An ultimate finding that drivers are employees could raise Uber's costs beyond the lawsuit's scope and force it to pay Social Security, workers' compensation, and unemployment insurance.

In June, a California labor commissioner ruled that an Uber driver was an employee, not a contractor. Uber has appealed that decision.

In arguing against class action status, Uber had submitted sworn statements from hundreds of drivers supporting the company. However, Judge Chen rejected this evidence because the statements could have been the product of biased questions.

There is simply "no basis," Judge Chen wrote, to support Uber's claim "that some innumerable legion of drivers prefer to remain independent contractors rather than become employees."

The case is Douglas O'Connor et al. v. Uber Technologies Inc., U.S. District Court, Northern District of California, No. 13-3826.