Some California Drivers May Lose Their Right to Pursue Wage Lawsuits against Uber

San Francisco, CA On December 22, the U.S. District Court for the Northern District of California heard arguments in James v. Uber Technologies Inc., a class action California labor lawsuit. Judge Edward Chen appeared to focus particularly on whether the facts of the case would support the inclusion of drivers who also have other jobs in the class seeking certification.

The intersection of the “A, B, C test” as set forth in Dynamex and the rules for certification of class action lawsuits has been explored before, in both Dynamex, itself and Ouadani v. Dynamex Operations E.. The latter decision, while not binding in the Ninth Circuit, may be informative because of the depth in which it explores a similar issue. Both lawsuits suggest that the determination of whether a class may be certified is very fact-specific. The bigger story, however, is the precedent it may create for the ride-sharing behemoth in future lawsuits.

Should drivers be paid as employees? 

Christopher James brought a lawsuit on behalf of himself and others similarly situated, alleging that Uber ailed to pay minimum wages, including wages for waiting time and overtime, as required under California labor law. Since the 2018 Dynamex decision, California employers have had to bear the burden of proof when they claim that workers are independent contractors. Specifically, they must show that:

• the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
• the worker performs work that is outside the usual course of the hiring entity’s business; and
• the worker is customarily engaged in an independently established trade, occupation, or business.

This three-part test is generally referred to as the “A, B, C test” because of the way the three elements are designated in the California Supreme Court’s opinion.

If any one of these three elements fails, then the worker is an employee and must be paid as required by California law. Only if the answer to all three inquiries is “no,” may the worker be legitimately treated as an independent contractor. For example, if a painter, who runs his own painting company, paints the office of a real estate agency, without the immediate supervision of anyone who works for the agency, that person is likely an independent contractor. Payment will be due to him under the contract between the painting business and the real estate business.

The situation of Uber drivers is less straightforward. Much litigation has focused on the second element. Put simply, the business of Uber is driving and that is what the drivers do, unlike the painter at the real estate firm.

The more recent challenges to AB 5, which codifies Dynamex, have focused on the third element. In a nutshell, the question in James is whether the driver who drives for Uber, Lyft and DoorDash is “engaged in an independently established trade, occupation, or business”? Of course, even if a court finds that a given driver is, that alone is not enough to establish that a worker is an independent contractor because the other two tests must be met as well.

In James, the Northern District of California has yet to get to that question because of a fundamental procedural issue that may stop the lawsuit dead in its tracks, at least for some drivers. The procedural hurdle that drivers who have other gigs must get over is whether their situation is sufficiently similar to that of drivers who work only for Uber.

Separate but entangled questions 

The questions that a court must address to decide whether a lawsuit can proceed as a class action are fundamentally different than the Dynamex “A, B, C” test. Nonetheless, they appear together in California wage lawsuits and depend on much of the same evidence. Failure to qualify as a class action lawsuit, or to be included in the class usually spells the end of that wage claim.

Under Rule 23(b)(3) of the Federal Rules of Civil Procedure, plaintiffs bear the burden  of persuading a court that common questions predominate over any questions affecting only individual members, and class resolution is superior to other available methods for fairly and efficiently adjudicating the controversy. A court may consider:

• the class members' interests in individually controlling the prosecution or defense of separate actions;
• the extent and nature of any litigation concerning the controversy already begun;
• the desirability of concentrating the litigation of the claims in the particular forum; and
• the likely difficulties in managing a class action.

Judge Chen has not ruled out permitting drivers who have other jobs to participate in the class sought to be certified. He has, at this point, merely indicated his concern. In Oudani, the Massachusetts District Court dug deep into the details of the varying contracts and working conditions under which different groups of Dynamex drivers worked. It appears that the same fact-intensive inquiry will be necessary in James.

The strategic picture 

With respect to the future of Uber lawsuits, however, it is worth considering that whenever Uber is successful in moving the argument away from the Dynamex tests and into a civil procedure issue, it has shifted the burden of proof away from itself and back to the workers. Furthermore, removing potential plaintiffs from the class certification relieves Uber of ever having to get to the substance of wage protections with respect to those plaintiffs. This chips away at the company’s potential financial exposure.

Finally, any precedent that Uber is able to create that limits the impact of Dynamex is likely to weaken wage protections in California.