U.S. District Judge Edward Chen granted class-action status to a lawsuit brought on behalf of Uber drivers who sued the company over their contractor status. Judge Chen ordered that the suit brought by three Uber drivers would also apply to all other Uber drivers in California who were driving there and did not waive their right to class-action arbitration.
Uber Technologies was created as an electronic hub connecting passengers and drivers. The suit claims that Uber treats its drivers as employees without providing them with certain benefits usually associated with the status of employee. If plaintiffs in this class-action suit get the upper hand, Uber will be treated rather as a taxi company.
In this case Uber will have to provide its taxi drivers with health insurance and compensate them for other expenses related to employees’ day to day work within their normal course of business. Such expenses would include among other things toll, fuel and car repairs.
This decision means the beginning of a major legal dispute that could have huge repercussions for Uber’s business model, as well as for other industries where workers have flexible working shift and can have more than one part-time job. The future of many startups relying on independent contractors will depend on the outcome of this litigation. Besides taxi and truck drivers businesses that are traditionally relying on independent contractors include food delivery, janitorial and cleaning services, construction and remodeling etc.
The line between employee and independent contractor is pretty thin and depends on many things. However the major difference is that employee basically sells his or her time and ability to work to his or her employer. Accordingly an employee must work for the employer certain number of hours a day, a week, or a month and obey employer’s orders.
Independent contractor enjoys flexibility while performing his or her job. Independent contractor is his or her own boss in terms of the number of working hours and the way he or she performs the job. At the same time independent contractors are not on salary. They get what they agreed to earn as a result of the performed job.