Class Action Alleges Uber’s Classification of Drivers as Independent Contractors Hurts More than Just Workers [UPDATE]

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Uber Technologies is among the defendants in a proposed class action lawsuit filed by a California livery service that alleges Uber’s misclassification of its drivers as independent contractors has had a ripple effect that’s forced some businesses with bona fide employees to shoulder an unfair share of the burden.

According to the lawsuit, Uber’s policy of classifying its drivers as independent contractors rather than as employees has allowed the embattled ride-share platform to avoid major costs while enabling the company to bump up its market share and keep prices low. The plaintiff alleges that as Uber’s market share grows, proposed class members’ ability to increase their own prices has taken a major hit. With all these factors in mind—not to mention what it costs for a company to cover workers’ compensation and unemployment insurance, Social Security and Medicare taxes, and myriad other items that pertain to having bona fide employees—the plaintiff claims Uber’s independent contractor policy hurts more than just its own drivers. From the complaint:

“Uber’s legal violations have injured Plaintiff and caused it to lose money. Plaintiff is a provider of livery services who pays its drivers as employees in accordance with California (and federal) law. As a result, Plaintiff bears significant burdens, including minimum wage obligations, overtime, meal and rest breaks, workers’ compensation insurance, unemployment insurance, health insurance, and the employer’s share of Social Security and Medicare taxes.

By avoiding these costs, Uber can charge lower prices. Uber’s lower prices take market share from Plaintiff and also constrain Plaintiff’s ability to increase the prices it charges as its costs increase, including for such things as wages, fuel, and other expenses. This injures Plaintiff by reducing its revenue as well as its profit margin. Plaintiff and a class of all providers of livery services that earn revenue from rides in California are therefore entitled to an injunction stopping Uber’s unlawful competition.”

Citing potential abuses of the California Unfair Practices Act, the lawsuit states that when a business prices its services below costs and harms competition, the business is liable for damages unless “they can prove that they priced below cost without a purpose to harm competition.” The plaintiff alleges that’s just what Uber does, claiming its rides are so cheap “for the purpose of injuring competitors.” As for how Uber allegedly gets away with this, the lawsuit places the blame with the company’s investors. More from the complaint:

“Uber’s investors would never have accepted ongoing losses in the billions of dollars if Uber had simply planned to create a transportation company that competes on even footing with small and mid-size competitors. Instead, investors understand that Uber’s purpose is to create a behemoth that counts customers in the millions and drives enough competitors out of the market that they will later be able to charge higher prices in the long run.”