Ridesharing

Uber Lawsuit Contends Company Saves Money By Misclassifying Drivers

Uber Technologies is facing a lawsuit that claims the ride-hailing company is misclassifying drivers in California as independent contractors in order to save money.

According to a report in Bloomberg citing the lawsuit, the complaint alleges that Uber is able to avoid paying $9.07 an hour in expenses and benefits to drivers that they would get if they were treated as employees. The misclassification amounts to about $500 million, according to the lawsuit filed by a car delivery service, reported Bloomberg. The lawsuit contends Uber uses illegal labor savings to price the rides under what they actually cost so it can steal customers from rivals that treat drivers as employees.

In January Uber reached a settlement with more than 2,000 New York drivers, agreeing to pay $3 million. Reuters, citing a court filing in federal court in Brooklyn, New York, reported that Uber agreed to pay the $3 million to settle what was a proposed class-action lawsuit brought on behalf of 2,421 drivers who contend the company took too many fees out of their fares. The lawsuit alleged a breach of contract for adding sales tax and a fee to the total fare amount, which then boosted the amount of service fees owed to the company. The drivers also claimed that Uber misled drivers with guaranteed compensation of $5,000 in the first month of employment. The settlement includes drivers who worked for the ride-hailing company starting from Dec. 29, 2009 and aren’t currently in arbitration with Uber. In May of 2017 Uber agreed to pay up to $80 million to 96,000 drivers in New York after admitting to not paying them enough, reported Reuters.

The latest lawsuit comes as business at Uber is booming. For its second quarter, the company reported revenue that increased  63 percent from the prior year to $2.8 billion, while gross bookings jumped 41 percent to about $12 billion. While the company narrowed its loss to $891 million in the second quarter from $1.1 billion a year ago, the loss was bigger than the $550 million loss it reported in the first quarter of this year. But a company spokesman pointed out that Uber has been spending more money on new businesses such as food delivery and scooters.

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