On the road to a gig economy, litigators take the wheel
By John Roemer
Special to the Bar Journal
Just four years from now, up to 40 percent of American
workers will be independent contractors navigating the so-called gig economy,
an Intuit Inc. study predicts – and it’s going to take a lot of lawyers to
realign the rules for a profoundly altered social landscape.
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Already at issue in California courtrooms and at regulatory
agencies are major changes in the state’s $28 billion transportation sector, as
ride-sharing platforms like Uber and Lyft plus the self-driving vehicle market
disrupt today’s car culture.
Uber has only been in business since 2009, but a collision of
the complex issues upending the industry came to light on New Year’s Eve 2013.
On that day an Uber driver was using the Uber app to look for fares when his
vehicle struck and killed a 6-year-old girl in a San Francisco crosswalk as she
headed home with her mother and brother. The family sued.
Uber’s defense to the family’s wrongful death and negligence
suit was that the driver wasn’t carrying a passenger at the time of the
accident, so he wasn’t working for the company, and Uber was not responsible. But
the underwriter of the driver’s personal injury insurance policy contended he
actually was working for Uber at the time, and his $15,000 coverage allegedly
did not apply.
It’s just one case, but the incident highlights some of the
issues – including liability, insurance coverage and worker classification – and
the complexities that plague this emerging industry.
San Francisco attorney Christopher B. Dolan of Dolan law
Firm PC, a past president of Consumer Attorneys of California who represents victim
Sofia Liu’s family, opened three lines of attack in the lawsuit. Along with wrongful
death and negligence claims, Dolan introduced a novel product liability cause
of action against the Uber app that driver Syed Muzaffar was using at the time
of the accident.
“It’s a defective product, a defective app,” Dolan said.
“California law prohibits distracted driving, yet Uber drivers have to look at
the app to get text messages. Uber really doesn’t want to get that into court.”
Dolan and his clients also worked with Assemblywoman Susan
Bonilla (D-Concord) to pass AB 2293, legislation that requires such
“transportation network companies” to carry liability insurance. Gov. Jerry
Brown signed the measure into law in 2014; it took effect July 1, 2015. After
the bill passed, Uber settled with Sofia Liu’s family for an undisclosed amount.
Dolan would only say it was “to the plaintiffs’ satisfaction.”
Dolan sees California Public Utilities Commission’s
rulemaking process becoming further complicated as it strives to frame
regulations for new forms of transit in a state where Google Inc. and Tesla
Motors Inc. are forging driverless technology. He foresees a wave of driverless
car litigation as the next major source of transportation lawsuits.
“There have been no personal injuries in California yet,” Dolan
said, “but in Philadelphia, Uber has petitioned to put full driverless vehicles
in service. This is coming on fast.” Dolan noted that Uber, with a market value
of more than $41 billion, pays about 75 percent of its gross profit per ride to
drivers, a strong impetus for the company to move toward driverless vehicles.
In December, the commission announced preliminary
regulations for autonomous cars that hold motorists – and presumably any transportation
networks that dispense with drivers – responsible for obeying traffic laws,
whether or not humans are behind the wheel.
“I represent the interests of those hurt by these new
transportation network carriers,” Dolan said. “The future is now.”
Meanwhile, Uber and Lyft drivers are plaintiffs in two
massive class actions that could become milestones that define the future of
the gig economy. The lawsuits stem from a long-running legal debate over
whether service workers should be classified as employees or as independent
contractors. Both cases turned unusually contentious when some of the driver plaintiffs
rejected proposed settlements that would have left them defined as contractors.
One objector in the suit against Uber is the case’s original
named plaintiff, driver Douglas O’Connor. A class of more than 240,000
California and Massachusetts Uber drivers have attacked the company’s business
model and tried to redefine how rideshare companies operate. The stakes were
high, so Uber drivers retained prominent class action employment veteran
Shannon Liss-Riordan of Boston-based Lichten & Liss-Riordan PC.
Uber brought on prominent class action defense lawyer
Theodore J. Boutrous Jr. of Gibson, Dunn & Crutcher LLP. Boutrous won a
unanimous U.S. Supreme Court reversal of class certification in the largest
employment class action in history against Walmart Stores Inc.
In April, Boutrous and Liss-Riordan announced they had
hammered out a settlement that would not change the drivers’ status, but would
afford them other benefits such as a drivers’ association and some job security
plus $100 million.
But one of the case’s original named plaintiffs, driver
Douglas O’Connor, objected and hired well-known litigators Brian S. Kabateck of
Kabateck Brown Kellner LLP and Mark J. Geragos of Geragos & Geragos APC to
try to monkey-wrench the settlement.
In May, Kabateck and Geragos filed a strongly worded
objection with U.S. District Judge Edward M. Chen of San Francisco. The
proposed “collusive and disastrous” settlement, they complained, is nothing less
than a $1 billion wage theft from the drivers because it does nothing about
classification, which Kabateck called “an important social issue that is at the
center of the gig economy.” The objection took aim squarely at the drivers’
lead counsel.
“It is apparent that this proposed settlement is designed
solely to enrich Ms. Liss-Riordan and protect Uber at the expense of its
drivers,” according to the objection. It “has broad implications and may
single-handedly ruin the economy for California workers.”
The objection noted that another Northern District judge,
Vince Chhabria, rejected a similar deal in a different
class action against Lyft by drivers – also represented by Liss-Riordan – because
it was inadequate. Referring to state authorities’ view, Kabateck and Geragos
wrote, “It is shocking for an out-of-state attorney to so blatantly sell out
the California class of drivers, consciously ignoring the California Labor
Commission’s ruling that an Uber driver is an employee and not an independent
contractor.”
Liss-Riordan and Boutrous denied collusion in separate court
filings. Liss-Riordan, without identifying him by name, termed Geragos a
“celebrity lawyer” not well versed in labor and employment law who did not
understand that an arbitration clause in Uber’s drivers’ contract could wipe
out many of their class action claims.
“Labor right advocates – who understand the issues we were
facing – have congratulated me on what I achieved in this case,” Liss-Riordan
said in a published interview. In her response to the objection, she
highlighted the case’s significance. “Simply because this case deals with an
emerging sector of the economy, and involves far more class members than the
average misclassification class action, does not mean the settlement is subject
to a different standard of approval,” she wrote.
Even so, in June Liss-Riordan sought to quell the class
members’ rebellion by slashing her fee request from $25 million to $10 million.
That gambit satisfied no one. A lawyer not involved in the case called it
desperate, especially when Liss-Riordan conceded she had not kept detailed
billing records.
“I feel strongly that lawyers have to stand up to
corporations like Uber,” Kabateck said in an email summarizing the dispute. “If
not us, who? The so-called ‘gig’ or ‘shared’ economy is one of the biggest
threats to individual workers in California today. Most don’t understand the
significance of having a growing percentage of the workforce out there without
the protection of an employer-employee relationship. As the Uber model seeps
into other businesses and professions, soon most people won’t be ‘employed.’
They will just float from job to job as business owners get richer and richer
off their hard work.”
John Roemer is a San Francisco Bay Area
freelance writer who has covered the California legal community for more than
20 years.