Uber's Class-Action Lawsuit Threatens the Future of the Sharing Economy

A 2013 lawsuit just opened up to 160,000 Uber drivers. Here's why that matters.

by / December 11, 2015

Through a class action lawsuit, Uber drivers are demanding back pay, reimbursement for expenses and a restructuring of their employment agreement. The lawsuit begin in 2013 with just a few drivers, but a ruling by U.S. District Court Judge Edward Chen on Dec. 9 will allow as many as 160,000 Uber drivers to join in. The ruling challenges the business model of the sharing economy and Uber's $2 billion in annual income.

Uber doesn't reimburse its employees for expenses because they are classified as independent contractors. In 2014, Uber slipped an arbitration clause into its driver agreement that precluded drivers from suing to settle grievances and required drivers to settle disputes out of court. Chen's ruling invalidates that clause, so what started as a minor dispute may become a big deal when the case goes to trial in June.

"Drivers use Uber on their own terms; they control their use of the app along with where and when they drive," the company told Vice News. "As employees, drivers would lose the personal flexibility they value most."

Shannon Liss-Riordan, the attorney representing the drivers, disagreed.

"We are not challenging Uber's system of providing flexibility for its workers," she said. "Uber has decided its system works best with drivers deciding when to log on. Nothing about our case challenges that aspect of the system. We are simply saying that when drivers are working for Uber, they are, under the law, Uber's employees and must receive the wage protections that employees receive."

During the past two years of litigation, Uber presented the court with the testimony of about 400 drivers who said they wanted to remain independent contractors. Liss-Riordan said that she contacted those drivers and found that 50 of them didn't understand the questionnaire Uber had provided and reported that they actually wanted to be full-time employees.

Uber reported that this new ruling won't change the outcome of the trial, which they predicted with confidence to be a victory for Uber.