At the close of June, a shocking new development arose from Uber’s employee misclassification suits. The drivers who asserted they were actual Uber employees and not independent contractors had their lawyers file a suit [James v. Kalanick, No. BC666055 (Super. Ct. Los Angeles County, CA, June 22, 2017)] against Uber’s former CEO (and current Board member) Travis Kalanick, as well as Chairman of the Board of Uber Technologies, Inc., Garrett Camp. From a legal standpoint, this appears to be a move to circumvent the arbitration provisions that Uber drivers sign in their independent contractor agreements. Directly suing these individuals can either work in the favor of the drivers or the executives, who may throw Uber’s arbitration provision back in their faces. It all boils down to what transpires in that California courtroom.
Under California’s Independent Contractor Law, there are two potential violations on the part of Uber. The “overt” misclassification of employees, where Uber “willfully” chose to regard them as independent contractors despite knowing the scope of their employment would make them employees. The second involves the liability of individuals who advise that their employer made the decision to willfully misclassify their employees. The verdict can go in multiple directions under that law. Should Kalanick and Camp argue that their part in the suit is still protected under the arbitration clause, they can leave unscathed. If they can’t, Uber will remain in hot water, but now so will its former CEO and its Chairman.
A significant takeaway from this situation involves compliance. Under the Affordable Care Act, applicable large employers must understand that full-time workers may be regarded as “employees” who are entitled to an offer of healthcare coverage. Sure, it’s just one part of the drivers’ arguments in the Uber misclassification case; but it’s a significant one nonetheless. However, companies are now aware that their executive board can come under fire should workers file suit for not providing benefits. Of course, the easiest solution to avoiding this situation is for companies to ensure that their workers are properly classified and compliance is in order. Uber, in this case, is a cautionary tale, with an ending that is still being written.
