Innovation

The Ninth Circuit Allows Uber to Appeal Driver Class Action Certification Decision

An appellate court has all but halted a case in California that will determine whether Uber drivers are employees or independent contractors.

The court’s ultimate decision will reverberate throughout the economy, not just the innovative platform economy. Platform economy companies have offered countless millions of people the opportunity to earn or supplement incomes according to their own schedules. These companies provide desperately needed services, especially to underprivileged neighborhoods.

A group of drivers sued last year, asking a federal court to determine whether Uber improperly classified them as independent contractors rather than employees. Uber contends both that it properly classified the drivers and that provisions in the drivers’ service agreements require the drivers to arbitrate, rather than litigate, their claims.

In a one-page order, the United States Court of Appeals for the Ninth Circuit granted Uber’s application to appeal the district court’s order certifying Uber drivers as a class action. The single case cited in the order allows for this type of appeal only if “the certification decision is manifestly erroneous and virtually certain to be reversed on appeal from the final judgment.”

This is good news for the “sharing” or “platform economy.” A decision by the Ninth Circuit to reverse the trial court would protect, at least temporarily, platform economy companies’ startup models.

Most platform economy companies are startups. Startups generally do not have the capital to hire massive volumes of employees. They rely, instead, on individuals who are willing to take a share of the fees charged in return for a great degree of autonomy.

The primary difference between employees and independent contractors is this autonomy. Independent contractors can drive their own cars, determine their own hours, decide which routes work best for them and so on. Employees must follow rules regarding what they can, or cannot wear, what routes they must take and what type of vehicles they must drive, for example.

Most platform economy companies consider the individuals providing services for them, their “partners,” as independent contractors. As independent contractors, the companies do not have to offer their partners certain benefits, like unemployment compensation, insurance, or – in the case of Uber drivers – reimbursement for vehicles’ wear and tear.

If a court decides that platform economy companies must treat their partners as employees, the companies will lose the ability to engage a number of individuals and will need substantial capitalization to hire employees. Without this ability to partner with individuals, the growth of the platform economy will slow substantially.

If the growth of the platform economy slows, it will do so on the backs of those who can least afford to bear the burden. At least one study estimates that 43 percent of the platform economy’s providers include those making less than $50,000, per year. Rideshare companies, like Uber, offer “last mile” transportation services, increasing the number of people who can use public transportation. And those who use “last mile” services tend to do so from neighborhoods underserved by public transportation

The appellate court could reverse the decision of the trial court on a number of grounds. It could decide the trial court’s entire reasoning was “manifestly erroneous,” or just that a particular, key part of the decision was erroneous. The articles surveyed suggest the clause in the drivers’ agreement compelling individual arbitration may be the crux of the appellate case.

Whether the appellate court affirms or reverses the trial court’s certification, that decision will have a significant impact on the economy. The court has the opportunity to provide stability in the platform economy, allowing innovative companies to continue to offer critical services to those most in need of them.


In Depth: Innovation

Whether improving processes, creating products or developing new ideas, the application of technology can enable real changes in how state government works, both in quality of services delivered to constituents, cost savings and quality of life. States have the opportunity in our national balance of government power, to address policy …

+ Innovation In Depth

Innovation