A new lawsuit against Uber Technologies Inc. claims that the company may save more than half a billion dollars each year by misclassifying drivers in California as contractors rather than employees.
The lawsuit, brought on behalf of Studio City-based livery service Diva Limousine Ltd., claims that Uber’s “below-cost and anticompetitive pricing” has taken its toll on a proposed class of pre-arranged transportation companies in California and others across the country who have affiliate relationships with them.
“Each day that Uber misclassifies its primary workforce, it steals wages from drivers earning below a living wage and gains millions of dollars in unlawful cost savings. Uber uses these savings to price its services far below their cost,” wrote the plaintiffs lawyers at Robins Kaplan and Keller Lenkner in Monday’s 27-page complaint. “Predatory pricing strategies have been a feature, not a bug, of Uber’s business model,” they wrote.
The suit, filed Monday in the U.S. District Court for the Northern District of California, brings claims under California’s Unfair Competition Law, which allows a competitor who is injured by unfair business conduct to seek an injunction blocking the violation. The suit also brings claims under the state’s Unfair Practices Act, which bars pricing services below cost unless a business can prove that such prices aren’t aimed at harming competition and provides for treble damages for companies injured by such practices.
Uber representatives didn’t respond to messages Tuesday morning.
The new suit claims that Uber fails to pay drivers for breaks as required under California law and shirks tax obligations, including the 6.2 percent employer Social Security tax, the 1.45 percent employer Medicare tax, and unemployment insurance contributions. “Uber has consistently lost money on Uber rides, and would lose even more if it bore the full costs of its vehicle fleet and labor force rather than illegally shifting them onto drivers,” the plaintiffs lawyers wrote.
In a phone interview Tuesday afternoon, Diva’s lawyers at Robins Kaplan and Keller Lenkner claimed that under the new worker classification standard set out in April by the California Supreme Court in Dynamex Operations West v. Superior Court, Uber drivers are clearly employees. They also noted that Diva, unlike Uber drivers themselves, aren’t bound by contracts requiring them to arbitrate their disputes with the company.
“This, we think, is the first case that presents a clean opportunity to rule on whether Uber is misclassifying drivers or not,” said Keller Lenkner’s Warren Postman.
Added Robins Kaplan’s Michael Geibelson, “The creation of technology does not allow a company to avoid compliance with the law on issues like worker classification and predatory pricing.”
Keller Lenkner founder Ashley Keller said that he had previously worked with the Robins Kaplan team while at litigation finance firm Gerchen Keller Capital. Keller and partners Adam Gerchen and Travis Lenkner quietly launched their plaintiff-side, Chicago-based law firm a little more than a year after the $160 million sale of Gerchen Keller to publicly traded litigation finance outfit Burford Capital Ltd. in Dec. 2016.
Said Keller of the firms: “We both saw an opportunity to do right by the competitors who have been harmed by Uber’s predatory pricing and misclassification of drivers.”
Read the complaint: