In a blow to Uber, a California judge on Wednesday significantly widened the scope of a class-action lawsuit that’s aiming to get the ride-hailing company to recognize its drivers as full-fledged employees rather than independent contractors, as Uber currently sees them.
Judge Edward Chen in September ruled to allow the case to proceed as a class-action suit, but said drivers could only participate in the case if they joined Uber before June 2014, the date when it modified employment contracts for new drivers that meant they had to agree to arbitration in the event of a dispute. This meant that only a “tiny fraction” of California’s 160,000 Uber drivers – past and present – could participate in the suit, Reuter reported.
But in a San Francisco court on Wednesday, Chen decided that some of the arbitration agreements were unenforceable, opening the way for the majority of those 160,000 drivers to participate in the class action.
Alarmed by the decision, Uber said in a statement it planned to appeal Judge Chen’s ruling “immediately.”
The outcome of the case, which is due to be heard by a jury next summer, could pose serious challenges for Uber’s business model, with the consequences potentially spreading to the wider on-demand economy.
While some praise the so-called “sharing economy” for bringing more wage-earning opportunities to more individuals, others see it as chipping away at job security in long-running industries, replacing positions with mostly part-time, low-paid employment.
At the current time, Uber considers its drivers essentially as freelancers, a classification that frees it from driver-related responsibilities such as Social Security, unemployment insurance, and workers’ compensation, thereby helping it to vastly reduce its operational costs. The system also means its drivers have to take care of car-related costs that can include everything from gas to insurance to vehicle repairs.
Uber’s current work practices have been an important factor in its rapid growth, with the set-up allowing it to make savings that it can then invest back into the company.