By: Allison Shrallow
Living in San Francisco, the mecca of all things tech, can make a person very accustomed to getting everything on-demand. Need groceries? Use Instacart. Want someone to clean your home? Try Handy. Looking for a date? Consider Bumble. The push-button economy has become so commonplace that it is difficult to imagine our lives without it.
Oh but there was a time. For most long-term San Franciscans, the prospect of attempting to hail a cab in 2009 remains in the forefront of their minds. And then one day a miracle happened. A little company by the name of Uber came to be. The idea was simple enough. Need a ride? Push a button. At first Uber only offered Town Cars and was seen as more of a luxury. However, in an effort to capture more customers, Uber began offering UberX, marketed as a less expensive, more efficient option than taxis.
Uber classified their drivers as independent contractors, granting drivers with the personal flexibility to work when and for as long as they wanted. As independent contractors, Uber was not required to pay for their drivers’ health insurance, social security, paid sick days or overtime. Further, Uber was under no obligation to reimburse its employees for mileage and other employment-related expenses. Uber’s current business model allows drivers to pocket 80% of the fare with the remaining 20% going to the company. As a result of having very little overhead and expenses, customers receive low fares.
This might all change as a result of a lawsuit filed by three drivers in 2013 alleging Uber misclassified them as independent contractors rather than employees. These drivers sought to represent California Uber drivers in a class action lawsuit against the ride-hailing service. On September 1, 2015, a court certified a class of all California drivers who have driven for Uber from August 2009 to June 2014 and who did not sign an arbitration agreement. However, on December 9, 2015, the court expanded the class of drivers to include those who signed Uber’s 2014 and 2015 arbitration agreements, concluding the agreements contained a non-severable Private Attorney General Act waiver that rendered the entire arbitration agreement unenforceable on public policy grounds. As a result, the majority of Uber’s 160,000 California drivers will be allowed to join the class action lawsuit. Uber has stated it will file an immediate appeal.
The case is scheduled to go to trial in June of next year. If the court finds Uber misclassified its drivers as independent contractors, Uber could be liable for vehicle-related and phone expenses for all drivers who joined the lawsuit, and, going forward, it would be required to pay significant sums on wages, insurance, and reimbursable expenses for its drivers. It would also most likely create a ripple effect throughout the entire push-button economy, prompting workers at other on-demand app companies to file suit, a move that most likely would require other companies to change their business model to account for the higher cost of doing business. This in turn would almost certainly result in customers having to pay more for services to which they have grown accustomed and workers losing the flexibility that attracted them to these companies in the first place.