No One Makes You Drive Using Uber

The Wall Street Journal reported this morning that Uber is settling two class action labor disputes for up to $100 million in damages to drivers in Massachusetts and California. In addition to the monetary settlement, it appears that Uber will also be revising its termination of driver practices and will permit drivers to post signs soliciting tips from rider. As the WSJ article further explains, other “sharing economy” businesses have faced similar lawsuits and challenges to their employment practices.

The primary issue is whether drivers for Uber can be classified as contractors or employees. This has immense importance for both the company and the drivers. To the potential benefit of the driver, classifying a driver as an employee could entitle them to benefits such as health care, and in certain states could entitle drivers to form a union. Or in the cases in California and Massachusetts, they could claim the right to get tips. For the company, there are increased liability issues relating to drivers who are under their employ rather than labeled a contractor. Of course, firms also have more control over employees who provide services than for contractors. It is a complicated issue and the legal relationship between worker and business is especially relevant for employment law in the United States. The Department of Labor’s 1994 Commission on the Future of Worker-Management Relations suggested that Congress create a standard definition of what an employee is for federal law purposes, rather than allow worker and firm to decide their relationship or have different federal statutes define it differently.

The legal relationship between Uber drivers and the firm is an interesting question that many have addressed. From my perspective, even more interesting is the use of a lawsuit to compel Uber to reclassify drivers as employees. When drivers agree to drive an Uber car, they sign an agreement stating that they “expressly agree that this Agreement is not an employment agreement or employment relationship.” I find nothing in the summary judgment denial asserting that drivers were fraudulently deceived into signing the agreement or misled, or that there is any unfair bargaining power between Uber and the driver. After all, Uber says it is a technology service that connects riders with drivers and is a well-known and used service, and it would seem to be a little odd if a driver claimed that they entered into an agreement they didn’t understand at the time. Nonetheless, this isn’t claimed.

As the summary judgment motion explains, there are several (complicated) legal tests for determining whether a worker is an independent contractor or an employee. One of the problems with law, judges, and courts today is the desire and need to create such complex standards and rules to apply to different factual situations. Just because something arises from the common law doesn’t necessarily mean it is the efficient application of the law, especially when there are conflicting and contradictory rules. Instead of doing the easiest and possibly most efficient approach — looking at the letter and intent of the fair agreement between Uber and the driver — the court did what courts usually do: apply a set of complicated legal tests to the facts and then conclude that it is appropriate for a jury to decide.

Uber, unwilling to risk judgment against it at trial, rationally settled with these lawsuits and agreed to make potentially reasonable changes. But should businesses be subject to massive lawsuits (or regulatory rule-making) to induce them to change a contract that was entered into lawfully and fairly? Should we let courts second guess mutually-beneficial business relationships because legal precedent has weaved a tangled web of judge-made tests that do not always fit perfectly with statutory mandates?

There will (hopefully) come a time when the benefits of innovative technology such as Uber will appear worth some renewed concern over our legal institutions restricting or altering the liberty of contract. It wasn’t always this way — our nation had a rich history of respecting the right of two or more capable parties to enter into mutually-beneficial arrangements and the terms of that arrangement. Unfortunately, even some conservative legal icons do not see the value in respecting the liberty of contract found in the Constitution. Apparently, on the one hand, it is judicial activism to allow the market to function normally. On the other hand, taking a red marker to a contract to remove the provisions you don’t like after the fact seems to me to be a pretty activist step for a court to take. When will we return to respecting the right of businesses and workers to make an agreement?

No one made these drivers sign agreements calling themselves independent contractors subject to the terms of the agreement. It is your choice if you want to use Uber’s technology service as a driver or a rider. It is your decision to comply with the terms of your agreement. No one makes you drive using Uber.