This Boston Lawyer Could Be Uber’s Nemesis as It Eyes Expansion

5/23/14Follow @curtwoodward

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Liss-Riordan has a separate, largely identical case pending on behalf of Uber drivers in Massachusetts, which has some of the country’s strictest employment laws. She’s also recently joined a similar California-based case against Lyft, a mobile-app-based provider of rides-for-hire largely from everyday drivers.

If courts start cracking down on big names like Uber, it wouldn’t be a stretch to see much smaller startups that depend on a contract-labor model start to get cold feet, and a cold shoulder from investors.

The fundamental question is whether the people providing the services advertised—in this case, drivers for Uber—should be treated as regular employees instead of contractors working on a job-to-job basis, and therefore have their daily workplace expenses paid by the company.

The answer is not always simple, since different states have different laws that decide when someone is working for a company rather than partnering with it. In California, where Uber is based and where Liss-Riordan’s potentially national class-action lawsuit is being heard, the courts weigh several factors to test whether a worker should be considered an employee.

The main consideration under California law is how much control a company has over a worker’s day-to-day decisions and activities. Among the other questions: Is the worker paid by the hour or by the job? Who supplies the tools and supplies needed to perform the work? Is the work itself part of the company’s regular business?

Uber declined to comment for this story, but it has previously characterized the lawsuit as “frivolous” and “entirely without merit.” The company asked to have the employment question thrown out of court last year, although the judge disagreed, saying the allegation was strong enough to require further arguments.

In that preliminary ruling, San Francisco-based federal Judge Edward Chen wrote that Liss-Riordan’s allegations were enough “to make the existence of an employment relationship plausible on its face,” and that some of the other facts at issue “favor finding an employment relationship.”

On the other hand, Chen wrote, some parts of the Uber model may resemble a legitimate independent contractor business, including the fact that drivers supply their own vehicles and are paid by the job, and especially the idea that Uber doesn’t control how often they work, where they drive or whether they choose to pick someone up.

“If this proves to be the case, plaintiffs’ assertion of an employment relationship would appear to be problematic,” Chen wrote.

The case could take a long time to resolve—mediation talks scheduled for last year apparently went nowhere. But the possibility of a loss or expensive settlement with Liss-Riordan does not seem likely to slow Uber’s aggressive expansion plans.

In his blog post noting the company’s mega-investment from Google and TPG Capital, co-founder and CEO Travis Kalanick made special note of the regulatory and legal roadblocks in the way as Uber seeks to expand around the globe.

Google’s stake in Uber would help it add “the expertise that comes with evangelizing new technology with governments and regulatory bodies around the world,” he said, while TPG Capital possesses “regulatory know-how in highly regulated … industries in the farthest corners of the globe.”

It was also hard to miss the backgrounds of Uber’s two new board members: Google chief lawyer David Drummond, who heads up the search and software company’s lobbying efforts, and attorney-turned-private equity billionaire David Bonderman.

“Our vision is to build a technology company that changes transportation and logistics in urban centers around the world,” Kalanick wrote. “And this financing gives us the fuel to make that a reality.”

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

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  • bedard.com

    I would not take Ms. Liss-Riordian lightly. She executes on legal theory. One of my heroes see http://wp.me/p2E2dS-yl