Uber Sued Again Over Tip-Skimming Claims, Case Could Go National

8/28/13Follow @curtwoodward

Car-hailing startup Uber, which just raised an enormous amount of money from Google Ventures and other investors, will have to earmark some of that new cash for legal bills.

The San Francisco-based company is being sued again in federal court, this time over claims that it’s stiffing drivers on tips.

A similar case was previously filed in Boston on behalf of all Massachusetts-based Uber drivers. But this new lawsuit seeks to broaden those claims nationally, seeking class-action status to represent Uber drivers across the country.

The lawsuit was filed by Shannon Liss-Riordan, a Boston-based lawyer who specializes in cases that involve unfair labor practices. She’s represented American Airlines skycaps who said they were cut out of tips by the airline’s fees, and cab drivers seeking to be recognized as employees rather than independent contractors.

In this case, Uber is being hit on both of those points. The federal lawsuit, filed earlier this month on behalf of two drivers, alleges that Uber is illegally taking a bite out of the drivers’ tips.

The lawsuit also alleges that Uber has “misclassified” drivers as independent contractors rather than employees, improperly making them pay work-related costs like gas and car maintenance.

This new lawsuit mirrors the central claim in the Boston case, in which cab driver David Lavitman said Uber was effectively skimming half his 20 percent tip by taking a $1 booking fee and 10 percent of the fare. Liss-Riordan is also one of the attorneys in that case.

“In some situations, they charge 20 percent gratuity to the customer and they only give 10 percent of that to the driver,” Liss-Riordan said. “In other instances, they just say the gratuity is included, but they don’t actually give the drivers a gratuity. So they’re basically lying to the customers.”

Uber hasn’t formally responded to the allegations in court, but Uber spokesman Andrew Noyes rejected the lawsuit’s claims, calling the lawsuit “frivolous.”

“The allegations made against our company are entirely without merit and we will defend ourselves vigorously,” Noyes wrote in an e-mailed statement. “Uber values its partners above all else and our technology platform has allowed thousands of drivers to generate an independent wage and build their own small businesses on their own time.”

It’s another tricky legal situation for Uber, which has earned tons of praise from consumers but faces a lot of regulatory and competitive struggles getting its service consistently operating in many cities around the U.S.

Uber’s slick, easy-to-use smartphone app hails cabs, “black car” sedans, and in some cases “ride-sharing” cars with a few taps on the touchscreen. The app shows how far away a car is, giving the user an idea of when their ride will arrive.

Uber also calculates fares, and payments are done entirely digitally, with no need to swipe a credit card or hand over cash (Uber keeps a bank card number on file to charge for the transaction).

The regulatory and industry pressures come because Uber sometimes crosses established lines in the cab and car-service markets. In many cities, longstanding local regulations have restricted the number of cab licenses and kept on-demand cars-for-hire separate from higher-end “black car” services, which are supposed to arrange rides well ahead of time.

Laws also generally haven’t caught up with the technological leaps enabled by smartphones, which can use GPS sensors to calculate cab fares. In many markets, it’s only legal to calculate a running car fare by using one of those boxes mounted to a cab’s dash.

Uber has been pugnacious in battling those limits, expanding to new cities and upsetting established players, often times generating backlash from regulators before marshaling its many fans to the cause. Success has been somewhat mixed so far—in Boston, for instance, court records unearthed by Xconomy show Uber claiming a very small slice of the city’s cab market through the beginning of this year. But overall, Uber’s ability to break into a closed-off, highly regulated U.S. market has been impressive for such a young company.

All of this—the quality of its product, quick expansion across the country and into overseas markets, battles with incumbent industries and government regulators—has made Uber into something of a rock-star company for this era of tech entrepreneurs.

Financiers like what they see, too. After raising some $50 million in venture cash, Uber recently confirmed that it had racked up a massive $258 million investment round from Google Ventures and other investors, which valued the company at about $3.5 billion.

In a blog post discussing the financing, CEO Travis Kalanick said the money would be spent to “expand into new markets, accelerate customer and driver acquisition, and fight off protectionist, anti-competitive efforts.”

It looks like he might have to add lawsuits from disgruntled drivers and labor-law specialists to that list of tasks, too.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

By posting a comment, you agree to our terms and conditions.

  • Lardar

    Uber has had opportunities to prove the accuracy of their meters. Each time they opted not to participate in testing. Makes you wonder.

    • Mike Reed

      As a customer, I don’t care. I care about an agreed upon price. The meter isn’t there for me – it’s there for the city, regulator, etc. If I agree to the price, I don’t need a meter.

      • Matthew von Manahan

        Mike, maybe you should consider walking then.

        • Mike Reed

          Or paying a contracted rate to a contracted carrier. Show me a price – if I agree, transport me for that price. Pretty simple, and sure beats walking.

          • Matthew von Manahan

            I meant for health reasons. But seriously, I don’t know wat you mean cause you can agree to the price up front with this service

          • john

            mike and Manada works for the cab company dont listen to they complete wrong Manada dont work for Uber he is here to discourage drivers and customers i am a driver that false what he said. Mike should call cab see if they will come to his job on home to pick him up on a time

  • manado

    if the driver forget to start the meter. they charge the client and they never give the money to the driver , they don’t even reply emails …..I challanging the spokesman of uber who said they treat there partner good , those people uber is taking adventage of the poor drivers whom can’t even speak up

    • Mike Reed

      Taking advantage of them by giving them additional business. You don’t like working with them? Stop. It’s that simple.

      • uberx driver

        Giving them extra business!!!! Mike, it seems like uber is paying you to blog about them.
        I am and uberx driver doing it for about 4 months now.
        LET ME TELL YOU THAT THERE IS NO WORSE COMPANY IN THE WORLD TO WORK FOR THAN THE MISLEADING and $$$$ hungry UBER. The partners (drivers) are nothing more than slave ….21st century slaves.
        you might ask: why do I do it? Because I’m between jobs now and I need to provide for my family.
        Uber is the BEAST WHO USES THE WEAK JOB MARKET TO EXPLOIT ITS “PARTNERS” or better better called slaves.
        In just about any major city, UBER hired THOUSAND of drivers, lowered the fares. Great for the clients, even better for UBER, but it created hell for its work force. I am happy now to get a client because in every corner of the city there are about 5- 6 uberx cars. Are they getting paid? No….just hopes and messages from uber that they will make great money…If $60 that I made tonight (on a Friday night in 8 hours) could be called great money. Subtract gas ($20) and see how much money is left …WAY BELOW MINIMUM WAGE

        Hopefully you get to see things through the eyes of someone working as an uberx driver.

        Let’s not even mention the TIPS, which uber made it a norm to be excluded for drivers who make less than minimum wage.
        In the meantime, UBER misleads riders in believing that tip is added to the final cost of the trip. It is only in the small print (who reads it nowadays? ) disclosed as NO TIP NEEDED.
        99.5% OF PASSENGERS KNOW THAT TIP IS ALREADY FACTORED IN, TELLING THE DRIVER THAT 20% IS ALREADY SET UP ON THEIR app. Another way to PROTECT their slaves, right?

  • manado

    if the rating of the driver drop to 4.6 they fire the driver and the way they set up the rating is totally wrong , the customer don’t have to rate the driver tel they use the service again , most of the forget if the last driver was good or no , so the job of the driver is between the hand of the customer

    • Mike Reed

      If you’re this unhappy with them, why do you continue to work with them? Just drop your affiliation.

  • manado

    they give discounts to the new customer like % 10 off and that comes out from the money of the driver ….free marketing for uber , as long the driver are not united , so many things uber is doing to the drivers , now they start charging the driver $10 a week for the use of the phone they bought from them with $300
    plus the % 20 commission

    • Mike Reed

      So don’t drive for them. Simple enough.

      • Rick Fictus

        Looks like we got us a paid shill. Sorry, bud, but companies in the US have to obey labor laws. If you don’t like it, move your company to Somalia.

        • Mike Reed

          I’d bet Uber will argue they don’t have employees, they have contract drivers. Otherwise you’d be able to argue any taxi driver was my employee any time I paid their fare. That’s simply not the case.

  • Dave Sutton

    This year, Uber hired former Facebook public policy manager
    Andrew Noyes to be its spokesperson. In this story, Noyes is quoted as saying
    that Uber “values its (driver) partners above all else.”

    But CEO Travis Kalanick says the new investment money would
    be spent to “EXPAND into new markets, ACCELERATE customer and driver
    acquisition, and FIGHT off protectionist, anti-competitive efforts.”

    “Expand, accelerate and fight.” This is the true Uber. When it comes to this company, community leaders tasked with protecting passengers and drivers must decide whether to step up or just get the heck out of the way.

  • aletterman

    UberX is NOT like a rock star. As an Uberx driver in Denver, realistically, I can tell you their business model is — of course I’m saying this figuratively– like the time when President Lincoln issued Emancipation Procl. executive order to free slaves in the south. And then people in bondage kept running away north. In this case, taxi drivers drivers run toward uberx for a new much better lives.

    Uberx has broken the chains holding taxi drivers slaves of cab companies like Denver Metro taxi & Yellow cab. Every week, as FREED drivers from the bondage share their stories with other slave drivers, more drivers leave & start enjoying their new found freedom with much more income with uberx.

    Now you know the real truth.

  • Allah

    Uber rating is so stupid and drivers for Uber are slave driving own cars, spending money for maintenance, giving 20 percent of earnings to Uber and overall drivers make nothing. Uber should not be existed to manipulate taxi and limo businesses.

  • Greg Lyons

    I was in a car accident i notify Uber the same day got no respose a week later i received a e- mail giving me 24 hrs to fill out there form. I was deactivated hours later after I got it and filled it out sent it e-mail there’s no fax or person to call . I used my own insurance unless you want to pay Uber $1,000. dedutable thats insane . I am a deactivated contractor / partner this is clearly a employe relationship when it’s convenient .

  • Greg Lyons

    Not to mention the $198. fee that was taken out of my check for what ?? The rating system is another means of control because you dont really know Its manipulative . I gave everybody a 5 star regardless of how nasty or rude they where that just me .and the app will often send you to the wrong locations and its your fault Uber is not responsible or take any responsibility for there product,we do not get cancellation fees . I hope they will change there policymaking decisions on behalf of all drivers .