Why it matters

A California federal court certified a class of Uber drivers, alleging they are employees and not independent contractors of the ride-sharing company. Uber contested the certification motion by arguing that the drivers failed to satisfy the requirements of Federal Rule of Civil Procedure 23, but the court disagreed. Although Uber emphasized factual differences between the drivers—how long they drove for Uber and whether they worked for other ride-sharing companies, for example—the legal question was the same for all the plaintiffs: "At bottom, it appears that common questions will substantially predominate over individual inquiries with respect to class members' proper employment classification," the court said. "The case will now proceed to trial."

Detailed discussion

Ride-sharing company Uber Technologies has grown to become a household name, but there is a hotly contested issue: whether Uber misclassified its drivers as independent contractors instead of employees. Several California drivers filed a putative class action alleging their misclassification entitled them to reimbursement for "all necessary expenditures or losses incurred … in direct consequence of the discharge" of their duties, as well as for the entire amount of any tips or gratuities "paid, given to, or left" by a patron.

The plaintiffs moved to certify a class of approximately 160,000 Uber drivers. Uber objected, arguing that the issue of employment classification could not be adjudicated on a classwide basis. The company's right of control over its drivers, as well as the daily realities of its relationships with them, were not sufficiently uniform across the class to satisfy the requirements of Federal Rule of Civil Procedure 23, Uber told the court.

But U.S. District Court Judge Edward M. Chen noted an inherent tension in the defendant's argument: "On one hand, Uber argues that it has properly classified every single driver as an independent contractor; on the other, Uber argues that the individual issues with respect to each driver's 'unique' relationship with Uber so predominate that this Court (unlike, apparently, Uber itself) cannot make a classwide determination of its drivers' proper job classification."

The court rejected Uber's position, ruling that a question of law common to class members predominated—whether or not the drivers should be classified as employees or independent contractors.

Analyzing the Rule 23(a)(1) factors, Judge Chen found the class to be objectively ascertainable from Uber's business records and, given the estimate of 160,000 individuals involved, easily satisfied the numerosity requirement. As for commonality, Judge Chen found "numerous legally significant questions" that will have answers common to each class member.

Finally, the court found the typicality and adequacy requirements were met despite Uber's contention that there is "no typical Uber driver," as the named plaintiffs' legal claims all arose from essentially the same conduct underlying the claims of fellow class members. Judge Chen was not persuaded by 400 affidavits submitted by Uber from drivers that hailed the company as a "liberator" from traditional employment. The company failed to establish these views were of a representative sample of the driver population, the court said, and constituted a small fraction of Uber's California drivers, just 0.25 percent.

However, the court found the plaintiffs had not demonstrated they were adequate class representatives with respect to their expense reimbursement claim, as there could be substantial variance as to what kind of expenses were even incurred by the putative employees in the first place.

The court then turned to the requirements of Rule 23(b). Analyzing predominance, Judge Chen applied the common-law test of employee or independent contractor from the California Supreme Court's 1989 decision in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. That decision set forth several indicia of an employment relationship with the most significant factor being the putative employer's right to control work details.

While Uber argued that it does not control any of the drivers' schedules, permitting them to work as much or little as they want, "the fact that Uber admits that it exercises a uniform amount of control over its drivers' work schedules (i.e., none), benefits Plaintiffs at the class certification stage because it proves that this factor can be adjudicated on a classwide basis," the court explained. Uber unilaterally sets drivers' pay and similarly acknowledged that it retains the same right of control over all drivers with respect to their ability to work for other companies and the routes drivers take—again, none.

"At bottom, it appears that common questions will substantially predominate over individual inquiries with respect to class members' proper employment classification under the Borello test," the court wrote. "Indeed, every (or nearly every) consideration under the California common-law test of employment can be adjudicated with common proof on a classwide basis. Some may favor Plaintiffs' position on the merits, while others support Uber's. But all favor certification."

For similar reasons, the court found that the claim for withheld or converted tips was susceptible to classwide arbitration as the relevant legal questions under the state's Labor Code—did Uber "take, or receive any gratuity" from its riders? And if so, has Uber "paid" or "given" the full amount of those tips to its drivers?—could be answered by common proof.

To read the order in O'Connor v. Uber Technologies, click here.