Legal Brief - Week 09 : O’Connor v. Uber Techs

Fabrice Tshiyoyi Banyingela

Professor Michael Hales – BYU Idaho

Business Law 375

13 November 2021

O’Connor v. Uber Techs

 

Case Facts

Douglas O’Connor (Connor) and Thomas Colopy (Colopy), two UberBlack drivers who allegedly suffered a common claim filed putative class actions against Uber Technologies, Inc. (Uber) for misclassifying drivers as independent contractors rather than employees. Uber then filed a motion for summary judgment.   

Plaintiffs vigorously dispute these contentions, and claim that Uber exercises considerable control and supervision over both the methods and means of its drivers’ provision of transportation services, and thus are eligible for various statutory protections for employees codified in the California Labor Code such as a requirement that an employer passes on the entire amount of any gratuity “that is paid, given to, or left for an employee by a patron.” The passenger’s fare—which was set unilaterally by Uber—was paid directly to Uber, and Uber then passed the fee onto the driver.

Generally, drivers were permitted to drive as much or as little as they wanted, although the Uber handbook stated the expectation that drivers accept all ride requests when logged in. The handbook also covered when to send the passenger a text message pre-ride, what types of radio stations to play, and other specifics of the job. Uber claimed that these specifics were merely suggestions. O’Connor (plaintiff) brought a putative class action on behalf of Uber drivers, seeking a judgment that the drivers were Uber employees. Uber argued that drivers were independent contractors. The parties disputed whether Uber could terminate drivers at will. Uber filed a motion for summary judgment.

The Issue

The main issue is to conclude whether the drivers be considered employees? If so, can they sue as part of a class-action lawsuit?

Rule

Classifying a worker usually is related to some legal principles such as taxation, employee benefits, employee wages and work hours, collective bargaining, workplace safety, and health, employment discrimination, and other employment-related matters – thus can lead to misclassification. Therefore, employers have the responsibility to carefully review and manage the independent contractor’s relationship to avoid misunderstanding.

 The two categories are very distinct. Independent contractors provide a service and are not subject to the control or direction of the organization or person, and are hence paid to render that particular service. On the contrary, employees enter into a contract of employment with an employer which creates an employment relationship and not a service provider relationship.

In the U.S. Supreme Court, when a statute does not clearly define “employee,” the term must be interpreted by reference to the common law of agency. The Legal Information Institute explains that “Under agency law, apparent authority is defined as an agent having the authority to act on behalf of a principal when or if manifestations of the principal to a third party would lead a reasonable third party to believe that the principal authorized the agent to act. If an agent has apparent authority and acts within the scope of the authority, then the principal is bound by the agent's actions.”

Under the common law, the court will focus on determining whether the hiring party retains control of the manner and means by which the work is to be performed – if proven, then the individual is considered an employee. Until the contrary is proved, courts will consider one or more factors as described by the “Borello Test” to examine the total circumstances of the relationship between the business and the person performing the work. The following is a Borello Test’s prototype list of factors (inclusive but not limited to) as described by the L&E Global:

·         the source of the instrumentalities and tools,

·         the location of the work,

·         the duration of the relationship between the parties,

·         whether the hiring party has the right to assign additional projects to the hired party,

·         the extent of the hired party’s discretion over when and how long to work;

·         the method of payment,

·         the hired party’s role in hiring and paying assistants,

·         whether the work is part of the regular business of the hiring party,

·         whether the hiring party is in business;

·         the provision of employee benefits; and

·         the tax treatment of the hired party.

Application

Uber Technologies provides transportation services in various cities whereby individuals can log in to the Uber online application on their gadgets, request a ride with an available driver, be picked up at the requested location, and be driven to their requested destination. At the end of the ride, clients pay directly to Uber via credit cards and a significant portion of which is then remitted to the driver who transported the passenger.

O’Connor receives finance assistance from SF Bay and Bay Network Limo to receive a luxury vehicle. In exchange for providing a car and paying all of O’Connor’s expenses (e.g., fuel and tolls), SF Bay received sixty percent of O’Connor’s earnings from transporting Uber passengers. Colopy another driver, had similar arrangements with two third-party limousine companies that provided him with a vehicle necessary to work as an UberBlack driver.

According to the Uber policy, drivers are recruited based on specific processes such as filling an online application form, uploading necessary documents, providing the vehicle’s information, passing a background check, passing a “city knowledge test”, and then attending an interview. The driver is then offered a contract that provides that the relationship between the transportation providers and Uber “is solely that of independent contracting parties.” The parties “expressly agree that this Agreement is not an employment agreement or employment relationship.”

The relevant contracts further provide that drivers will be paid a “fee” (i.e., fare) upon the successful completion of each ride. Because Uber receives the rider’s payment of the entire fare, the relevant contracts provide that Uber will automatically deduct its own “fee per ride” from the fare before it remits the remainder to the driver.

A found in their reports, Uber bills itself as a “technology company,” not a “transportation company.” The company notes that it owns no vehicles, and employs no drivers. Rather partners with alleged independent contractors that it frequently refers to as “transportation providers.” Among other things, Uber notes that drivers set their own hours and work schedules, provide their own vehicles, and are subject to little direct supervision.

With their slogan “Everyone’s Private Driver”, Uber is deeply involved in marketing its transportation services, qualifying and selecting drivers, regulating and monitoring their performance, disciplining (or terminating) those who fail to meet standards, and setting prices. Plaintiffs vigorously dispute these contentions and claim that Uber exercises considerable control and supervision over both the methods and means of its drivers’ provision of transportation services and that under the applicable legal standard they are employees.

When prospective drivers sign up with Uber, they agree to waive their right to sue in favor of arbitration, a private, quasi-legal process that generally favors corporations over individuals. The two class-action lawsuits claim that Uber violated various laws and regulations by classifying drivers in California and Massachusetts as independent contractors rather than employees. Uber denies these claims. The Court did not decide who was right, but both sides in these lawsuits agreed to a settlement.

Conclusion

Although the court held that the drivers were presumptive employees of Uber, not independent contractors, there was a mix of questions of law and fact in determining the Plaintiffs’ employment status. Based on the Borello factor, the fact that Uber supplies the critical tool of the business – a smartphone with the Uber application, and depends on the drivers to have an income qualifies these drivers as employees. But because drivers waived their right in favor of arbitration, the court ruled for arbitration, and therefore, Uber’s motion for summary judgment is denied. 

Reference

Michael H (2021). “Business Law.”

Brigham Young University - Idaho, Chapter 19

Wikipedia. “California Labor Code”. 2021

https://en.wikipedia.org/wiki/California_Labor_Code. (Accessed 13 November 2021)

Go Legal. “Are you an employee or an independent contractor? What is the difference?”

March 202. https://www.golegal.co.za/employee-independent-contractor/. (Accessed 13 November 2021)

Legal Information Institute. “Agency Law”. 1992

https://www.law.cornell.edu/wex/apparent_authority. (Accessed 13 November 2021)

L&E Global. “Legal Framework Differentiating Employees From Independent

Contractors”. No date. https://knowledge.leglobal.org/eic/country/united-states-of-america/legal-framework-differentiating-employees-independent-contractors-22/. (Accessed 13 November 2021)

Case Text. “O’Connor v. Uber Techs, Inc.” March 2019.

https://casetext.com/case/oconnor-v-uber-techs-inc-32. (Accessed 13 November 2021)