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Uber drivers to proceed as class on misclassification, but wage, OT, and paid sick leave claims will proceed individually

By Brandi O. Brown, J.D.

Drivers refused to limit their minimum wage and overtime claims to the time they spent actually driving for the defendant, which prevented class resolution of those substantive claims.

A federal district court in California certified a Rule 23 class of Uber drivers who alleged that they were misclassified as independent contractors and but ruled their minimum wage, overtime, and paid sick leave California Labor Code claims would have be pursued on an individual basis. As a result of the ruling, a trier of fact will determine, on a class-wide basis, whether the class satisfied the first two prongs (A and B) of the ABC test under state law for distinguishing between employees and independent contractors, as well as the expense reimbursement and itemized wage statement claims. However, individual consideration will be necessary for the third prong of the test, as well as class members’ minimum wage, overtime, and sick leave claims (James v. Uber Technologies Inc., January 26, 2021, Chen, E.).

According to the complaint filed by the proposed representatives of a putative class of over 4,800 Uber drivers in California, the drivers were misclassified as independent contractors and were not paid minimum wage, overtime, and paid sick leave. They also alleged that Uber failed to reimburse them for business expenses and provide them with properly itemized pay statements. They sought damages for a period beginning in late February 2019, as well as declaratory and injunctive relief, and moved for class certification under Rule 23 of the Federal Rules of Civil Procedure.

Rule 23(a) satisfied. The drivers’ motion was granted in part. With regards to the Rule 23(a) criteria, the court determined that ascertainability and numerosity were satisfied under subsection (a)(1) of the rule—the class was composed of drivers who opted out of the arbitration agreement and had driven since February 28, 2019. As for commonality under subsection (a)(2), the court determined that the question of whether Uber misclassified its drivers was a common question to which the “ABC test” articulated in Dynamex Operations W. v. Superior Court and subsequently codified in section 2775 of the California Labor Code was applicable.

The court rejected Uber’s argument that it was not a “hiring entity” under that section, noting that the same argument had already been rejected by the California Court of Appeal. Likewise, the court concluded that typicality and adequacy were satisfied, even though Uber argued that most drivers would oppose reclassification and that the putative representatives were not typical in other ways.

Predominance. Under subsection (b), however, predominance issues made complete certification impossible. Partial certification was granted on the threshold misclassification question, but certification was denied for some of the substantive claims. On the misclassification claim, the first two parts of the three-part ABC test were capable of class-wide treatment. The first prong requires consideration of whether drivers are free from control and direction by Uber. A factfinder could review the terms of Uber’s current standard agreement and determine, in a single stroke, that it satisfied the first prong, the court concluded. While this decision would benefit Uber on the merits, at this stage it benefited the drivers because it allowed for certification. To the extent that Uber argued that there were different agreements during the class period, the court noted that it could easily certify subclasses.

As for the second prong, which considers whether the drivers perform work outside the usual course of business for the defendant, the court noted that it has repeatedly held that Uber and its drivers are both in the business of transportation; thus, class-wide treatment was appropriate.

Partial certification only. However, under the third prong of the ABC test, which considers whether “the worker is customarily engaged in an independent established trade, occupation, or business of the same nature as that involved in the work performed” for the defendant, Uber effectively argued that individualized evidence was required. Variations under this prong had made it impossible for the court to certify a class of Uber drivers who owned or worked for third-party transportation companies in two previous cases, including O’Connor v. Uber (O’Connor II) and O’Connor v. Uber Technologies (O’Connor III). A factfinder, the court explained, could plausibly determine that some of the putative class members were engaged in an independently established business, while others were not, and the determination would require an “intensive fact-based inquiry on a case by case basis.”

The court noted that if the trier of fact finds that either prongs A or B (or both) were not satisfied by the defendant, then the drivers would be presumed to be employees, regardless of prong C. If not, the jury would have to determine on an individual basis whether each driver satisfies the third prong. Class certification was appropriate either way and “would considerably advance the litigation,” the court concluded.

Minimum wage and overtime. Regarding the substantive claims, the court explained that the drivers’ argument for class-wide adjudication of their minimum wage and overtime claims was clouded by their insistence that “all time that drivers are on the [Uber] app and thus ready and willing to accept ride requests is compensable time.” The court had previously recognized that determining whether an employee’s waiting time is compensable for purposes of violations is an inquiry that is fact-specific and context-dependent. In this case, the court explained, it was presumable that some of the drivers in the putative class engaged in other activities, including paid work for others, while waiting on ride requests in the Uber app. “Determining Uber’s liability for wages cannot be determined on a class-wide basis,” the court concluded, “and individualized determinations would be complex and manifold.”

However, the court noted that in O’Connor III, it had already determined that expense reimbursement claims relating to vehicle and phone-related expenses were appropriate for class certification. As for the itemized pay statements, the predominance requirement was satisfied as well.

The court also certified the class as limited to those drivers who opted out of Uber’s arbitration agreement, and considering the effect of Proposition 22, passed in November, the court ended the class period on December 16, 2020.