James v. Uber Technologies Inc.

Background

Christopher James and Spencer Verhines, current or former Uber drivers, sought certification of a class of California Uber drivers who had not released their claims and had opted out of Uber’s arbitration agreement. They alleged that Uber misclassified drivers as independent contractors and asserted California claims for business-expense reimbursement, minimum wages, overtime, itemized pay statements, paid sick leave, and unlawful business practices. They also sought declaratory and injunctive relief, including reclassification of drivers as employees.

The motion was brought under Federal Rule of Civil Procedure 23(b)(3). The court analyzed whether the proposed class satisfied Rule 23(a)’s requirements—ascertainability, numerosity, commonality, typicality, and adequacy—and Rule 23(b)(3)’s requirements of predominance and superiority. The court identified approximately 4,828 potential class members based on Uber’s records.

Commonality, Typicality, and Adequacy

The court held that the drivers’ employment-classification question was common to the class. It applied California’s “ABC” test, under which workers are presumed to be employees unless the hiring entity proves all three of these conditions:

The court rejected Uber’s argument that it was not a “hiring entity” under California law and concluded that the ABC test applied. It also held that James and Verhines were typical representatives and adequate representatives of the proposed class. The court rejected Uber’s argument that some drivers opposed reclassification or that the named plaintiffs’ full-time driving and other circumstances made them atypical.

Predominance

The court concluded that common issues predominated for the first two parts of the ABC test. For the control question, the standardized agreements governing drivers could provide common proof, even though drivers had different experiences using the application and Uber had used multiple agreements. The court stated that subclasses could address differences among agreements if necessary.

For the usual-course-of-business question, the court held that drivers’ transportation work was within Uber’s transportation business, regardless of whether individual drivers worked part time, used other applications, operated other businesses, or paid Uber through a subscription arrangement.

The court reached a different conclusion for the third ABC requirement. Whether individual drivers were independently engaged in a separate business could depend on facts such as using competing applications, building their own clientele, incorporating a business, holding a commercial driver’s license, advertising under their own names, and identifying as self-employed for tax purposes. The court held that this issue required an individual, fact-based inquiry and could not be resolved for the entire class in one decision.

The court found that the expense-reimbursement and itemized-pay-statement claims could be determined using common proof. It found that the minimum-wage, overtime, and paid-sick-leave claims could not be certified for class-wide determination because the plaintiffs insisted that all time logged into the application, including waiting time, should count. Determining whether waiting time was compensable would require individualized inquiries into each driver’s circumstances.

Arbitration Opt-Out and Superiority

The court rejected Uber’s argument that identifying drivers who opted out of arbitration would require extensive individualized inquiries. Uber had already identified potential class members through its records, and the court stated that determining whether a driver signed the opt-out provision could be handled on a class-wide basis.

The court also held that a class action was the superior method for resolving the common issues. It found that the case could address the employment-classification questions and the expense-reimbursement and itemized-pay-statement claims in a common proceeding, while individual proceedings could address the remaining wage claims if necessary.

Proposition 22 and Disposition

Proposition 22 took effect on December 16, 2020, and established conditions under which app-based drivers would be treated as independent contractors. The court held that Proposition 22 did not apply retroactively. It therefore ended the class period on December 16, 2020, and applied the ABC test to alleged conduct between February 28, 2019, and that date.

The court granted in part and denied in part the plaintiffs’ Rule 23(b)(3) motion. It certified a class of Uber drivers who drove in California between February 28, 2019, and December 16, 2020, and opted out of Uber’s arbitration agreement. The fact-finder may decide on a class-wide basis whether Uber satisfied the first two ABC requirements. If the drivers are found to be employees based on those requirements, the class may proceed with the expense-reimbursement and itemized-pay-statement claims. The court denied class-wide treatment for the third ABC requirement and for the minimum-wage, overtime, and paid-sick-leave claims, which required individual determinations. Judge Edward M. Chen ordered the parties to meet and confer about class notice and related procedures.