Uber Heads To Court Over How It Classifies Its Drivers
A California judge is expected to decide whether to limit the employee-versus-independent contractor case to three drivers — or allow in 160,000 drivers.
Uber is heading into one of the biggest court battles it’s seen to date.
US District Judge Edward Chen is slated to decide on Thursday whether to grant class action status on a lawsuit in which three drivers are suing Uber for reportedly misclassifying them as independent contractors rather than employees. Chen’s decision could have a huge impact on Uber’s business model and also create a ripple effect throughout the entire on-demand economy.
Uber, which is a ride-hailing service that pairs passengers with drivers via a smartphone app, is one of the world’s most valuable startups. Since the company launched in 2009, it’s grown to operate in more than 250 cities in 58 countries. Uber is also one of the highest-valued venture-backed companies in the world with a valuation of more than $50 billion by some estimates.
In the wake of this battle, several on-demand companies appear to be re-thinking the independent contractor classification. The grocery-delivery startup Instacart said in June that it’s switching hundreds of its personal shoppers from contract workers to part-time employees. And house-cleaning startup Homejoy announced in July that it was permanently shutting down after being sued over the classification of its workers. Several similar lawsuits have also popped up against other on-demand companies, including Homejoy, Postmates, Handy, Shyp and Washio.
“I believe the curated model approach that so many companies followed due to Uber’s success will now come under question,” said Jeff Tennery, CEO and co-founder of on-demand job site Moonlighting. “Too many of them followed Uber down this rabbit hole and won’t make it out.”
However, Tennery added, “this ruling will not sound the death knell for the sharing economy. Uber has the financial wherewithal and leadership ability to adjust their model and overcome the human resource expense.”