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Federal Court allows Uber drivers to proceed with employment benefits class action

February 15, 2021 | Employment Law

On Tuesday, January 25, 2021 a federal court allowed Uber drivers to proceed with parts of their class action lawsuit of employment benefits they claim they are owed by the company.  In the ruling, viewed as an initial victory for the drivers, the court decided that a group of approximately 4,800 drives can collectively sue Uber for allegations, including the denial of expense reimbursements and itemized pay statements.  Under California state law, these benefits are guaranteed to all employees.  Uber, one of the largest ride sharing companies in the world, has allegedly misclassified drivers as independent contractors prior to the passage Proposition 22 or Prop 22.

“Gig economy” companies like Uber and Lyft classify their workers as independent contractors, which means drivers are forced incur operating expenses out of their own pockets, such as gasoline, maintenance and insurance.  Drivers are also not provided with benefits equal to those of employees, such as minimum wage, health insurance, workers compensation and paid sick or family leave.

Several drivers brought the lawsuit against Uber last year alleging that the ride share giant unjustly maneuvered between Prop 22 and California’s passage of AB-5, which sought to extend the state’s existing labor protections to a wider group of workers.  The state of California eventually sued Uber and Lyft for not complying with the law.  State regulators made the determination that the labor laws applied to both companies, and a state appeals court agreed with that determination.

Under AB5, gig companies are required to prove that independent contractors are performing work outside the business’s core function, are free from the entity’s control and traditionally perform such work independently of the company.  The drivers claimed that they were indeed under the direct supervision and control of Uber, and that the ride share giant violated California’s existing labor laws by failing to: reimburse business expenses, pay the minimum wage, pay overtime, provide itemized pay statements, and provide paid sick leave.

But as Uber and Lyft were mounting legal challenges to the allegations of failing to comply with existing AB-5 labor laws, California voters passed Proposition 22, an initiative that exempted rideshare and food delivery app companies from complying with AB-5. But drivers alleged that, in the time after AB-5 went into effect but before Prop 22 did, Uber should have been treating them as employees. During the lead up to the vote on Prop 22, ride share companies poured millions of dollars into campaign ads and social media blitzes to influence the outcome of the vote. They hired several political consulting firms known for extreme tactics, including smear campaigns against labor activists and paying drivers to appear in emotional ads aimed at showing Prop 22 in a favorable light.

Uber is facing several lawsuits and allegations over worker misclassification, which could make the company liable for substantial back payments to their drivers. The Supreme Court of California recently ruled that Dynamex, a court ruling precedent that became the legal basis for AB-5, applies retroactively to gig companies, which also make them liable for reimbursing employees with back payments dating back several years before the passage of AB-5.