As traditional taxis have lost market share to ride-sharing aps they have gone on the offensive. Legislative and regulatory tactics have failed to stop people from flocking to companies like Uber and Lyft, and PR campaigns designed to deter riders from embracing new technology have fallen flat, but the sharing economy may yet meet its demise. There are a number of lawsuits working their way through the court system that could undermine the business model that is toppling the taxi cartel.
Taxi Drivers File Suit Over Customers Lost to the Competition
In St. Louis, Missouri, four cab drivers have filed a class action lawsuit against Uber alleging that they have seen a 30-40% decrease in income since Uber started operating in the area. They argue that Uber drivers are functionally equivalent to taxi drivers, so the fact that Uber drivers are not regulated like taxi drivers is unlawful.
Similar lawsuits have been filed by taxi drivers in New York, Philadelphia, Connecticut, Chicago, Florida, and many other jurisdictions.
The St. Louis lawsuit was filed shortly after Uber opened up shop in the area, despite being told by regulators it was not allowed to do so without jumping through a few more hoops. Uber is actually involved in a separate lawsuit against the local taxi commission, alleging the commission is engaged in anti-competitive practices in violation of the Sherman Antitrust Act.
Watching these lawsuits play out in the local papers has been interesting because local officials have basically thrown up their hands and said it’s up to the courts to sort this mess out. That’s quite a change of tune from the state that brought us President Truman and his famous sign proclaiming “the buck stops here.”
Independent Contractor or Employee?
A group of drivers is suing Uber in federal court in California, arguing that they should be classified as employees rather than independent contractors. This is an important distinction because employees must be paid a minimum wage and overtime, and be provided other benefits. Uber argues classifying drivers as employees would destroy the entire business model the sharing economy is built on.
In September, the district court judge hearing the case ruled that it could proceed as a class action. Uber attempted to appeal this decision, which is known as a class certification, to the Ninth Circuit Court of Appeals. The Ninth Circuit recently denied Uber’s request to appeal the class certification decision. This means Uber will have to take the case to trial and then appeal the case as a whole to have its concerns about the certification decision addressed.
Brouhaha Over Background Checks
New Jersey is home to yet another class action lawsuit against Uber.
One of the arguments frequently made by taxi companies hoping to reign in Uber is that Uber drivers aren’t as thoroughly vetted as taxi drivers. Uber supporters point out that perhaps the real problem is that taxi drivers are overregulated. In any case, Uber does background checks on all of its drivers.
In an ironic twist, Uber is now being sued by a New Jersey man who claims Uber’s background check process improperly excluded him from being hired.
Will Uber Be Sued Out Of Business?
It is clear we are living in a changing world. Thanks to advances in technology, businesses all types are seeing new opportunities open up, and facing new challenges they must overcome. Regulators and the courts are just scrambling to keep up. During these tumultuous times we must remember to pause and take a closer look at what is going on. More specifically, we must ensure that our legal system remains an impartial arbitrator of justice, and that lawsuits do not become the means to an anti-competitive end.
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