Tip-Skimming Lawsuits Against Uber Motor Along

3/17/14Follow @curtwoodward

As it battles established competitors and local regulators around the country, Uber is becoming known for its legal troubles almost as much as its slick car-for-hire smartphone app. 

Recently, the focus of those skirmishes has been local regulations in a handful of cities around the country. But Uber also continues to battle several lawsuits in the federal courts, including accusations that it has illegally skimmed tips intended for drivers. 

One of those tip-skimming lawsuits, filed on behalf of a Chicago passenger, recently got new life when it was moved to San Francisco, where Uber is based. The case was taken over by a federal judge who was already overseeing a similar lawsuit from two Uber drivers, who are represented by a prominent Boston-based labor lawyer. 

Uber has denied wrongdoing in both cases and sought to get them dismissed. The lawsuits could pose an expensive problem for the company, since each is seeking national class-action status, potentially expanding the pool of plaintiffs to huge numbers of people and driving up any settlements or penalties it has to pay.

Uber’s smartphone app lets consumers summon a ride at several different price levels, from regular passenger cars to taxis to more expensive “black car” drivers. Fares are determined by the driver’s GPS-connected smartphone app, and the price is all-in-one, automatically deducted from a bank card on file after a ride is over.

Uber has marketed its service to consumers by saying tips are included—sometimes by specifying a percentage, other times just saying that it’s rolled into the price.

These two particular federal lawsuits question whether Uber’s fees for arranging the ride unfairly eat into the intended tip after the fact. The lawsuit brought by the drivers also claims that they’re being unfairly classified as contractors rather than actual employees.

Uber certainly has firepower to fight these battles: in August, the company raised $258 million from private investors including Google Ventures. In his blog post about the investment, Uber CEO Travis Kalanick said the money would help his company “fight off protectionist, anti-competitive efforts,” and noted that Google’s top lawyer, David Drummond, was joining the company’s board.

But even the most pugnacious competitors can find a practical streak when they get tied up in court. In late December court filings, Uber and the Boston lawyer representing drivers, Shannon Liss-Riordan, said they had “begun to discuss the possibility of participating in early private mediation” to resolve the case. They’re due to update the judge about any progress by the end of this month.

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

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