Uber insisted on Wednesday that it may not have to reclassify its drivers as employees despite a new California law that appears to require just that. Hours later, the ride-hailing company learned it would soon get a chance to test its argument in court.
A longtime legal antagonist filed a class-action suit on behalf of drivers in federal court in California on Wednesday, accusing Uber of wrongly classifying drivers under the state’s employment test.
In the complaint, the lawyer, Shannon Liss-Riordan, said Uber had failed to pay its California drivers the minimum wage, overtime and expense reimbursements that they are entitled to as employees. The complaint asked the court to issue an injunction requiring the company to reclassify drivers.
“Uber is grasping at straws,” Ms. Liss-Riordan said of Uber’s argument that it did not need to reclassify its drivers. If she were to prevail, Uber could be required to pay hundreds of millions of dollars to drivers in lost compensation and reimbursements.
The complaint hinges on a 2018 decision by the California Supreme Court establishing a new test for employment in the state. Under that decision, a company is required to classify workers as employees rather than contractors if it directs or controls their work; if the work they do is a usual part of the company’s business; or if the workers don’t typically operate an independent business performing the same work they perform for the company.
The law the Legislature passed on Wednesday codifies and broadens that decision. Under the new law, anyone deemed to be an employee under the test would be entitled to protections like unemployment insurance, workers’ compensation and paid sick leave, not just a minimum wage and overtime pay.
In a call with reporters on Wednesday, Uber’s chief legal officer, Tony West, acknowledged the company faced a higher bar for demonstrating that drivers were truly independent contractors, but argued that “just because the test is hard doesn’t mean that we will not be able to pass it.” He alluded to “several previous rulings” finding that drivers perform a task that is “outside the usual course of Uber’s business” — suggesting the company could pass the second and potentially most challenging portion of the new test.
Neither Mr. West nor the company cited any specific court rulings to support this assertion. An Uber spokesman provided two examples of rulings from arbitrators rather than courts that had deemed drivers to be outside the company’s usual business.
Legal experts said Uber was unlikely to win on this claim in court. “Courts have not necessarily been receptive to that argument,” said Richard Meneghello, co-chairman of the gig-economy practice group at the law firm Fisher Phillips, which represents employers. “From a neutral perspective, it looks to be an uphill battle for the gig economy.”
Uber did not have any comment on the class-action suit beyond what it said on Wednesday.
A summary judgment decision in 2015 in another high-profile case against Uber, also brought by Ms. Liss-Riordan, found the argument that Uber wasn’t in the driving business “strains credulity.” And a decision against Uber in an unemployment insurance case in New York said the idea that Uber was not a transportation company but simply provides leads for drivers is a “non sequiter [sic].”
In a related case involving Grubhub, which operates an Uber-like platform that connects restaurants and delivery drivers and which Ms. Liss-Riordan is also litigating, a judge ruled that food delivery was a regular part of the company’s business in Los Angeles, where the plaintiff worked. The judge nonetheless ruled that the plaintiff wasn’t an employee under the state’s older employment test. But under the newer test, which California’s Supreme Court adopted shortly after the Grubhub ruling, this conclusion would likely make drivers employees. Grubhub is challenging that position in an appeal.
Orly Lobel, a law professor at the University of San Diego who has argued against classifying all Uber and Lyft drivers as employees, said, “In the end, I think it’s very likely that courts think that these are employees, but I don’t think it’s absolute.”
The lead plaintiff in the new case is an Uber driver named Angela McRay, who has used the platform since November 2016, sometimes for more than 40 hours per week.
Ms. Liss-Riordan, who is a Democratic candidate for Senate in Massachusetts, said the lawsuit highlighted the issues that had motivated her to run for office. “Drivers are making the business possible but they aren’t making minimum wage and they’re being trampled on,” she said.