New lawsuit claims Uber exploits its drivers
Adding to the growing list of challenges facing Uber Technologies Inc. , a well-known Boston labor lawyer is suing the upstart car service claiming that it is exploiting drivers.
The suit filed Thursday in Suffolk County Superior Court in Boston by Shannon Liss-Riordan, who has won major labor lawsuits representing Starbucks baristas, house cleaners, skycaps, and exotic dancers, accuses Uber of misclassifying its drivers as independent contractors to avoid paying them the same as employees with benefits.
The suit also accuses Uber of not giving drivers all the money they receive in gratuities from riders, that the company “retains a portion of the gratuity for itself.” That alleged conduct violates the Massachusetts tips law, said Liss-Riordan.
“By not classifying its drivers as employees, Uber is shifting the expenses of running a business to its workers,” Liss-Riordan said. “Making the workers pay for these business expenses saves Uber an enormous amount of money.”
Liss-Riordan filed the case on behalf of an Uber driver, Hakan Yucesory of Brookline, but is seeking class action status so the case could apply to other drivers.
Uber releases few statistics about its business: It does not, for example, disclose how many drivers are in the service. But in May Uber said is “generating 20,000 new driver jobs every month” worldwide. It now operates in 38 countries, including 77 cities in the United States, Canada, and Mexico.
In one online post on the company’s website Uber boasted that its drivers can make $90,000 in New York and $74,000 in San Francisco. Liss-Riordan said those figures do not take into account the expenses the drivers incur as independent contractors that the company would otherwise foot if they were treated as employees.
Launched four years ago in San Francisco, Uber makes a smartphone app that riders use to hail a private car service. The company describes itself as a software platform that its “partners” — not drivers — use to build their own small businesses.
But Liss-Riordan said Uber is at heart a transportation service whose drivers provide its core function and should be treated as regular employees with protections and rights under state law.
“It’s these so-called new technology companies that are using old-school methods to keep their workers from having their rights under the law,” she said. “It’s the newest spin to avoid employee classification.”
Uber spokesman Taylor Bennett said that while the company would not comment on the lawsuit, “I can tell you that Uber will vigorously defend the rights of riders to enjoy competition and choice, and for drivers to build their own small business.”
Liss-Riordan filed a similar labor suit against Uber on behalf of six drivers in US District Court in California, where the company is based.
The federal judge presiding in that case in June issued an order forcing Uber to allow drivers to opt out of an arbitration clause in their contract with the company. That clause prevents drivers from joining Liss-Riordan’s class action lawsuit.
If Liss-Riordan wins the case in Boston or California, Uber may be forced to change a key part of its business model.
“If their drivers are classified as employees then that suddenly makes their business model untenable,” said Denise Cheng, a research assistant at the MIT Center for Civic Media.
Cheng studies the growth of the so-called peer-to-peer economy in which companies such as Uber act as middlemen and use software to link customers with service providers, whether they’re drivers, housecleaners, or even fitness coaches.
Uber is perhaps the highest profile example of a company that fits into the peer economy category. If these services continue to grow, Cheng said states should consider a new hybrid employment classification for the people providing the labor.
“There needs to be a third classification that eases the transition between being a freelancer and being an employee,” she said.
Massachusetts has some of the most stringent employment laws in the country. Under state law, for workers not to be considered employees they must be engaged in activities that are “outside the usual course of business of the employer.”
Liss-Riordan has made a career of going after companies over Massachusetts employee classification and other labor laws.
Over the past decade she has filed numerous cases against FedEx Ground Package System Inc. over its classification of drivers as contractors. The company has argued it is a “sophisticated information and distribution network” and not a delivery company required to treat drivers as employees. She has settled suits with FedEx in some states, but her firm has an ongoing case against it in Massachusetts, Montana, and Pennsylvania.
Her biggest judgment came in a lawsuit against Starbucks. In a case over tipping practices at the coffee chain, Liss-Riordan won $14 million for about 11,000 baristas. A federal judge in Boston ruled in 2012 that the chain was in violation of Massachusetts law by letting shift supervisors take a cut of the pooled tips.
Adored by techies and many urban professionals, Uber has garnered plenty of enemies, too. Taxi companies and regulators around the United States have accused the company of running an unlicensed car service and ignoring government rules put in place to protect riders.
One such lawsuit was filed last year against Uber by Boston Cab Dispatch, a local taxi operator. Liss-Riordan has also sued Boston Cab for the same issue as her complaint against Uber — that it is misidentifying drivers as contractors instead of employees.