Judge Won’t Force Uber to Treat California Drivers as Employees

SAN FRANCISCO (CN) – A federal judge on Monday refused to make Uber reclassify drivers as employees in California, despite claims the alleged misclassification deprives the state of tax dollars and increases its spending on public assistance for low-paid workers.

This 2017 file photo shows the building that houses the headquarters of Uber in San Francisco. (AP Photo/Eric Risberg, File)

Rejecting claims that a proposed injunction would primarily benefit the general public, U.S. District Judge Edward Chen declined to treat the requested relief as a motion for a “public injunction” as defined in the 2017 Fifth Appellate District ruling McGill v. Citibank.

Uber driver and lead plaintiff Thomas Colopy “is seeking a private, not public, injunction,” Chen wrote in his 18-page ruling.

Chen noted the Ninth Circuit strongly disfavors granting class-wide injunctions in cases like Colopy’s where a class has not yet been certified. He further emphasized that because many California Uber drivers have signed arbitration agreements barring them from pursuing labor disputes in court, “the number of drivers entitled to injunctive relief is likely to be a small subset of all drivers.”

At a hearing last month, veteran labor rights attorney Shannon Liss-Riordan argued that Uber’s employment practices not only affect drivers but an “entire industry, many have said an entire economy” based on depriving workers of their rights under the California labor code.

Uber attorney Theane Evangelis, of Gibson, Dunn & Crutcher in Los Angeles, argued an injunction is wholly unnecessary because drivers can still get monetary damages for any violation of law after the case is resolved.

The Uber attorney insisted that no evidence supports the “extraordinary remedy” of a preliminary injunction that would “fundamentally alter Uber’s entire business model.”

Chen found the lack of information on how many California drivers opted out of arbitration agreements “underscores the prematurity of Mr. Colopy’s motion for broad preliminary injunctive relief.”

Colopy’s lawsuit is one of the first labor class actions filed against Uber since California Gov. Gavin Newsom signed Assembly Bill 5 into law in September. The new state law, which takes effect Jan. 1, requires employers like Uber classify drivers as employees rather than independent contractors, making them eligible for benefits such as minimum wage, overtime, sick pay, expense reimbursement and workers’ compensation.

Uber has said it will continue classifying drivers as contractors next year because it believes its drivers are not employees under the three-part “ABC test” established in the California Supreme Court’s 2018 Dynamex decision and written into law by Assembly Bill 5. Uber is one of three companies that vowed to pour $30 million each into a 2020 ballot measure aimed at overturning the new state labor law.

Liss-Riordan noted the California Legislature specifically recognized public harm caused by worker misclassification when it passed AB5 earlier this year. The text of the law states that worker misclassification has been “a significant factor in the erosion of the middle class and the rise in income inequality.”

Despite Liss-Riordan’s fervent advocacy in favor of making Uber change its labor practices, Chen concluded a private dispute over worker misclassification and wages could justify a preliminary injunction to remedy alleged harm to the general public.

However, Chen rejected Uber’s motion to dismiss claims that it misclassified workers as contractors and failed to reimburse job expenses, such as gas, vehicle maintenance, car insurance and phone and data plans.

The judge dismissed a claim of willful misclassification with prejudice, finding the California Legislature did not create a private right of action for people to sue over that violation of the law. Chen also dismissed claims for overtime and minimum wage with leave to amend, finding Colopy failed to specify how much he was paid and how many hours he worked. Colopy will have an opportunity to add those details to an amended complaint.

Liss-Riordan had argued the actual amount of time her client spent as a driver on the Uber app could be easily ascertained from Uber’s records, adding she does not believe that level of detail is required at this early stage of the litigation. Chen disagreed.

The judge also rejected Uber’s motion to strike class allegations from the lawsuit.

Reached for comment by email, Liss-Riordan said she and her client were pleased with Judge Chen’s partial denial of Uber’s motion to dismiss and rejection of the request to strike class claims. She said they would amend the complaint with new details on Uber’s alleged wage and hour violations.

“While the court declined to grant our request for injunctive relief on a preliminary basis, the court left open the possibility that we may obtain injunctive relief on a permanent basis later in the case,” Liss-Riordan said. “So we look forward to proceeding with the case and at last requiring Uber to comply with California law and stop depriving its drivers of their basic rights under the California Labor Code.”

An Uber spokesman declined to comment. Uber’s attorney, Evangelis, did not immediately return an email request for comment Monday afternoon.

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