Back in February, this blog featured an article discussing a pair of lawsuits filed against tech startups, Uber and Lyft, challenging the companies’ characterization of their drivers as independent contractors. According to a website providing information about the Uber lawsuit (and created by the plaintiffs’ attorneys in that case), the suit is set for a hearing on class certification in August. The outcome of that hearing may determine whether the Uber plaintiffs can proceed in their class action lawsuit or face arbitration of their claims.
On June 17, 2015, in a case brought by an Uber driver seeking reimbursement of out-of-pocket expenses, the California Labor Commissioner ruled that the driver was, in fact, an employee, not an independent contractor. As a matter of California law, that ruling is non-binding on the class action lawsuits (and Uber has appealed the ruling in any case, seeking a trial de novo in the trial court), the Labor Commissioner’s ruling may, nevertheless, have some effect on the class action lawsuits. Even if it does not, there remains the possibility of additional Labor Commissioner proceedings brought by other drivers, which could – as one article described it – “clobber” Uber.
In the meantime, since the class action lawsuit was filed against Uber, the company’s legal problems have accumulated faster than a speeding rideshare. In August 2014, for example, an Uber customer filed a $2 million lawsuit against the company, alleging that an Uber driver stabbed him repeatedly in the chest and arm.
But that’s not all.
On September 9, 2014, the National Federation of the Blind brought suit [PDF] against Uber in California federal court, alleging its drivers refused to provide rides to blind customers with service dogs in violation of the Americans With Disabilities Act and California state law. The suit claims that Uber’s drivers abandoned blind customers when the drivers realized they were accompanied by service dogs. The suit further alleges that, in at least one instance, a driver placed the customer’s service dog in the trunk of the car, then refused to pull over and let the customer exit the vehicle when the customer realized what had happened. Uber sought to dismiss the suit, but a federal judge ruled that Uber must defend the matter. You can read more about this lawsuit here from the Washington Post and here from the Consumerist.
In January 2015, a New Delhi woman sued Uber in California federal court, alleging that she was violently raped by one of its drivers. Her suit specifically faulted Uber for approving the driver based on faulty credentials and without doing a proper background check.
Speaking of background checks…Enter yet another class action lawsuit against Uber. Filed in California federal court on June 29, 2015, this lawsuit alleges that Uber violated the Fair Credit Reporting Act when conducting background checks of its drivers. Lyft was also named in a similar, separate class action lawsuit.
Apart from these legal woes, Uber faces other challenges to its business model. For example, drivers unhappy with their working conditions have begun organizing online under the title UberPeople. Uber drivers in Southern California have formally associated with the Teamsters Union as the California App-Based Drivers Association. It remains to be seen how effective these developments will be.
Abroad, Uber faces additional obstacles – nothing new for the company. According to an article in Legal Tech News, Uber has been forced to suspend its French operation after “two of its senior European managers were detained on July 6 and ordered to stand trial, charged with ‘deceptive commercial practices’.” In Mexico, regulations are in the works “that will require drivers and cars to be registered, and also require Uber to pay into a fund for transportation infrastructure.” Uber has already suspended operations in Spain and New Delhi, India.
As the saying goes, “there is no such thing as bad publicity.” However, the reality of that is open to debate. At some level, the considerable negative publicity Uber earns with each lawsuit – particularly lawsuits questioning rider safety – will start harming its bottom line. And no one should think that Uber has yet seen the last of its legal troubles. Actions by foreign countries, like those taken in France and elsewhere, may impede Uber’s expansion into new, lucrative markets. Back in the U.S., the class action lawsuit seeking to declare Uber drivers as employees threatens to upend the company’s business model entirely.
So, what about that business model? Uber functions on a business model that attempts to transfer all of the company’s risk to its drivers and customers, while retaining little risk – or accountability – for itself. If just the lawsuits currently filed are believable, Uber’s business model has already endangered customer safety and possibly violated its customers’ civil rights. While Uber’s business model may, for now, be sound from the perspective of the company’s balance sheet – Uber is, after all, worth $50 billion – do we need to question whether it is a sound business model from a public policy perspective?
To add to its growing list of legal problems, Uber was fined $7.3 million by a California administrative law judge on July 15 for refusing to provide information to state regulators about its business operations. Providing this information was a condition of Uber being allowed to operate its taxi alternative company in California. In light of the lawsuit brought against Uber on behalf of blind riders, it is interesting that one piece of information Uber was required to show California regulators is how accessible its cars are to the disabled.