EDWARD M. CHEN, District Judge.
Plaintiffs Douglas O'Connor, Thomas Colopy, Matthew Manahan, and Elie Gurfinkel are current or former drivers who have performed services for Defendant Uber Technologies, Inc. Docket No. 330. (Second Amended Complaint) (SAC). They are prosecuting this lawsuit against Uber on behalf of themselves and a putative class of approximately 160,000 other "UberBlack, UberX and UberSUV drivers who have driven for Uber in the state of California at any time since August 16, 2009."
Pending before the Court is Plaintiffs' motion for class certification. The merits of the case are not currently at issue. Rather, the Court needs to consider only two questions at this juncture; whether the case can properly proceed as a class action, and, if so, how. While answering both of those questions necessarily requires the Court to perform a rigorous analysis of a number of legal issues, the parties correctly recognize that one threshold issue is of paramount importance to the success or failure of Plaintiffs' class certification motion: as to whether drivers are Uber's employees or independent contractors under California's common-law test of employment, will "questions of law or fact common to class members predominate over any questions affecting only individual members" of the proposed class? Fed. R. Civ. P. 23(b)(3); see also Ayala v. Antelope Valley Newspapers, Inc., 59 Cal.4th 522, 533 (2014). That is, are the drivers' working relationships with Uber sufficiently similar so that a jury can resolve the Plaintiffs' legal claims all at once? This question is of cardinal importance because if the Plaintiffs' worker classification cannot be adjudicated on a classwide basis, then it necessarily follows that Plaintiffs' actual substantive claims for expense reimbursement and conversion of gratuities cannot be adjudicated on a classwide basis either.
Uber contends that the drivers' employment classification cannot be adjudicated on a classwide basis. According to Uber, both its right of control over its drivers, as well as the day-to-day reality of its relationship with them, are not sufficiently uniform across the proposed class to satisfy the requirements of Federal Rule of Civil Procedure 23 (hereafter Rule 23). As other courts weighing certification of employment misclassification claims have recognized, however, there is inherent tension between this argument and Uber's position on the merits: on one hand, Uber argues that it has properly classified every single driver as an independent contractor; on the other, Uber argues that individual issues with respect to each driver's "unique" relationship with Uber so predominate that this Court (unlike, apparently, Uber itself) cannot make a classwide determination of its drivers' proper job classification. See In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953, 957 (9th Cir. 2009) (holding that "[a]n internal policy that treats all employees alike for exemption purposes suggests that the employer believes some degree of homogeneity exists among the employees. This undercuts later arguments that the employees are too diverse for uniform treatment"); see also Norris-Wilson v. Delta-T Group, Inc., 270 F.R.D. 596, 602 (S.D. Cal. 2010) (explaining that "it may be that [Defendant] believes its workers are in fact independent contractors for reasons unique to each individual, but it's more likely the case [Defendant] believes the independent contractor classification is universally appropriate. That runs at cross-purposes with the reason for objecting to class certification, which is that it's impossible to reach general conclusions about the putative class as a whole") (emphasis omitted). It appears that at least one of these arguments cannot be entirely accurate, and for the purposes of resolving this motion the Court concludes that a number of Uber's class certification arguments are problematic.
For the reasons explained below, and further for the reasons stated on the record at the lengthy hearing on this matter, Plaintiffs have met their burden to show that a class can be certified on both the threshold employment classification question and their claim for converted tips under Labor Code section 351 (hereafter, Tips Claim). Specifically, the Court will certify the following class to pursue the Tips Claim under Rule 23(b)(3):
Plaintiffs' request to certify a class under California Labor Code section 2802 is denied without prejudice for the reasons stated herein, as is Plaintiffs' request to certify other possible classes or subclasses of Uber drivers.
The Court assumes the reader's familiarity with the procedural and factual background of this increasingly complicated litigation. See generally O'Connor v. Uber Techs., Inc., ___ F. Supp. 3d ___, 2015 WL 1069092 (N.D. Cal. 2015); O'Connor v. Uber Techs., Inc., No. 13-cv-3826-EMC, ___ WL 1760314 (N.D. Cal. May 2, 2014); Mohamed v. Uber Techs., Inc., ___ F. Supp. 3d ___, 2015 WL 3749716 (N.D. Cal. 2015). Hence, the Court does not separately recount such details here. Instead, any relevant factual or procedural details are included in the body of this Order as necessary to provide context for the Court's discussion of the merits of Plaintiffs' class certification motion.
This Order proceeds as follows. First, the Court discusses the legal standards under Rule 23 that are applicable to Plaintiffs' request for class certification. Next, the Court describes the legal standard that will be applied at trial to determine whether the class members are Uber's employees or independent contractors under California law. For while the Court will not decide the merits of Plaintiffs' case at this juncture, the Court can only be assured that the Rule 23 criteria are satisfied by previewing the merits of Plaintiffs' claims, and, particularly, the types of proof (whether common or individualized) that will be offered at trial.
After laying out the relevant legal standards, the Court will then apply the Rule 23(a) criteria to the Plaintiffs' claim that they are/were Uber's employees, rather than independent contractors. Because the Court concludes that the Rule 23(a) criteria are satisfied on the threshold misclassification question, the Court will then further consider whether Rule 23(a) is satisfied with respect to Plaintiffs' substantive law claims. Ultimately, while the Court concludes that Plaintiffs satisfy all of the Rule 23(a) criteria for their Tips Claim,
The Court will then consider whether Plaintiffs have met their burden under Federal Rule of Civil Procedure 23(b)(3) to prosecute their Tips Claim on a classwide basis. This requires that the Court first determine whether the employment classification question can be resolved with reference to predominately common proof. The Court concludes that the predominance requirement is satisfied with respect to whether the class members are properly classified as independent contractors or employees. The Court similarly concludes that class members' substantive Tips Claim can be litigated on a classwide basis because common questions predominate over individualized issues. However, the Court will not certify the claims of any driver who accepted one of the driver contracts listed in the Appendix to this Order, and who did not timely opt-out of an arbitration clause in those contracts, because the Court finds that individualized issues as to whether Uber's more recent arbitration clauses are enforceable against class members will predominate over questions common to all putative class members regarding arbitration. Finally, the Court concludes its analysis by finding that a class action is a superior method for adjudicating class members' Tips Claims, and further finds that Plaintiffs' counsel will fairly and adequately represent the interests of the class.
Class actions have long been an integral part of the legal landscape. And while expressly authorized by Rule 23, it must be recognized that the "class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2550 (2011). "In order to justify departure from that rule, a class representative must be part of the class and possess the same interest and suffer the same injury as [her fellow] class members." Id. (internal quotation marks omitted).
Accordingly, before certifying a class, this Court "must conduct a `rigorous analysis' to determine whether the party seeking certification has met the prerequisites of Rule 23." Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012) (citation omitted). The Supreme Court has made it clear that Rule 23 "does not set forth a mere pleading standard." Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432 (2013). Rather, the party seeking certification must "affirmatively demonstrate" her compliance with the requirements of both Rule 23(a) and 23(b). See Dukes, 131 S. Ct. at 2551.
Rule 23(a) of the Federal Rules of Civil Procedure permits Plaintiffs to sue as representatives of a class only if:
Fed. R. Civ. P. 23(a)(1)-(4). The purpose of these Rule 23(a) requirements is largely to "ensure[] that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate," and to "effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." Dukes, 131 S. Ct. at 2550 (internal quotation marks and citations omitted).
If each of the Rule 23(a) requirements are satisfied, the purported class must also satisfy one of the three prongs of Rule 23(b). Here Plaintiffs seek certification under Rule 23(b)(3) which provides:
As noted previously, the underlying merits of the case, while admittedly relevant at the class certification stage, should not overly cloud the Court's certification analysis — the only question presently before the Court is whether the requirements of Rule 23 are met. See Comcast Corp., 133 S. Ct. at 1432. The fact that certain elements of proof may favor the defendant on the merits does not negate class certification; the issue is whether the proof is amenable to class treatment. Moreover, "[n]either the possibility that a plaintiff will be unable to prove his allegations, nor the possibility that the later course of the suit might unforeseeably prove the original decision to certify the class wrong, is a basis for declining to certify a class which apparently satisfies the Rule." Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975). Indeed, even "after a certification order is entered, the judge remains free to modify it in the light of subsequent developments in the litigation." Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982). Ultimately, whether or not to certify a class is within the discretion of the Court. United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO CLC v. ConocoPhilips Co., 593 F.3d 802, 810 (9th Cir. 2010); see also Levya v. Medline Indus. Inc., 716 F.3d 510, 513 (9th Cir. 2013).
This Court has previously written at length about the common-law test of employment in California. See O'Connor, 2015 WL 1069092, at *4-6 (N.D. Cal. 2015). Applying that test at the summary judgment stage, the Court determined that because Uber drivers "render service to Uber," they are Uber's presumptive employees as a matter of law. Id. at *9. Thus, the Plaintiffs have proved their prima facie case, although the ultimate question of their employment status will need to be decided by a jury. Id. at *10-12. The burden will be on Uber at trial to "disprove an employment relationship." Id. at *10.
For the purpose of determining whether a presumptive employer can rebut a prima facie showing of employment, the California Supreme Court's seminal opinion in Borello "enumerated a number of indicia of an employment relationship." Narayan v. EGL, Inc., 616 F.3d 895, 901 (9th Cir. 2010). The "most significant consideration" is the putative employer's "right to control work details." S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations (Borello), 48 Cal.3d 341, 350 (1989) (internal quotation marks omitted). Formulated somewhat differently, the "`principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.'" Alexander v. FedEx Ground Package Sys., Inc., 765 F.3d 981, 988 (9th Cir. 2014) (quoting Borello, 48 Cal. 3d at 350). The putative employer's right of control need not extend to every possible detail of the work. See Narayan, 616 F.3d at 904 (explaining that a truck driver's "ability to determine a driving route is `simply a freedom inherent in the nature of the work and not determinative of the employment relation'") (quoting Toyota Motor Sales U.S.A., Inc. v. Super. Ct., 220 Cal.App.3d 864, 876 (1990)). Rather, the relevant question is whether the presumptive employer retains "all necessary control" over the worker's performance. Borello, 48 Cal. 3d at 357 (emphasis in original).
Critically for the purposes of this motion, the Supreme Court has further stressed that the pertinent question under California's right-of-control test is "not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise." Ayala, 59 Cal. 4th at 533 (emphases in original) (citation omitted). Or, as the Supreme Court stated the issue nearly a century ago, "`[i]t is not a question of interference, or non-interference, not a question of whether there have been suggestions, or even orders, as to the conduct of the work; but a question of the right to act, as distinguished from the act itself or the failure to act.'" Id. (quoting Hillen v. Indus. Accident Comm'n., 199 Cal. 577, 581-82 (1926)); see also Air Couriers Int'l v. Emp't Dev. Dep't, 150 Cal.App.4th 923, 933 (2007) (explaining that if the employer has the authority to exercise control, "`whether or not that right is exercised with respect to all details, an employer-employee relationship exists'") (quoting Empire Star Mines Co. v. Cal. Emp't Comm'n, 28 Cal.2d 33, 43 (1946))).
No one consideration "is dispositive when analyzing employee/independent contractor status" under the Borello test. O'Connor, 2015 WL 1069092, at *5. Indeed, as this Court previously explained, the case law clearly indicates that the ultimate outcome of the classification inquiry turns on the specific details of the service relationship under consideration, rather than a mechanical checking-off of various factors. See id. at *5-6; see also Alexander, 765 F.3d at 989. For instance, in some cases an independent contractor relationship has been found where, among many other considerations, there is evidence that the putative employer did not control its hirees' work hours. See, e.g., Mission Ins. Co. v. Workers' Comp. App. Bd., 123 Cal.App.3d 211, 216 (1981). But other cases have found that on the whole, a service relationship was one of employment even where the hiree had full control over his or her own work schedule. See Air Couriers Int'l, 150 Cal. App. 4th at 926; see also O'Connor, 2015 WL 1069092, at *5-6.
Still, while no one factor is dispositive, some factors are considered to be more important in ascertaining the extent of the putative employer's right to control. For example, when evaluating the extent of a presumptive employer's right to control, the Supreme Court has stressed that an employer's "right to discharge at will, without cause" is "strong evidence in support of an employment relationship." Borello, 48 Cal. 3d at 350 (citations omitted); see also Ayala, 59 Cal. 4th at 531 (characterizing the right to discharge without cause as "[p]erhaps the strongest evidence of the right to control"); Narayan, 616 F.3d at 900 (characterizing the right to discharge at will as the "most important" factor for determining whether an employment relationship exists). This is because the "power of the principal to terminate the services of the agent" without cause "gives him the means of controlling the agent's activities." Ayala, 59 Cal. 4th at 531 (citations omitted). The "worker's corresponding right to leave is similarly relevant: `An employee may quit, but an independent contractor is legally obligated to complete his contract.'" Id. at 531 n. 2 (quoting Perguica v. Indus. Accident Comm'n, 29 Cal.2d 857 (1947)).
The putative employer's right to control work details, while the primary factor, is not the only relevant consideration under Borello, however, and the control test cannot be "applied rigidly and in isolation." Borello, 48 Cal. 3d at 350. Thus, the Supreme Court has also embraced a number of "secondary indicia" that may be relevant to the employee/independent contractor determination. Id. These additional factors include:
Borello, 48 Cal. 3d at 355 (citing Driscoll Strawberry Assoc., Inc., 603 F.2d 748, 754 (9th Cir. 1979)). While the Supreme Court has explained that each of the above "secondary indicia" are helpful in determining a putative employee's job status, as noted above, "the considerations in the multi-factor test are not of uniform significance." Ayala, 59 Cal. 4th at 539. "Some, such as the hirer's right to fire at will and the basic level of skill called for by the job, are often of inordinate importance," while "[o]thers, such as the `ownership of the instrumentalities and tools' of the job, may be of only evidential value relevant to support an inference that the hiree is, or is not, subject to the hirer's direction and control." Id. (internal quotation marks, citations, and modifications omitted). Finally, it is clear that the "label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced." Alexander, 765 F.3d at 989 (quoting Borello, 48 Cal. 3d at 349) (internal modifications omitted).
Before analyzing numerosity under Rule 23(a)(1), courts typically require a showing that the class to be certified is ascertainable. See Daniel F. v. Blue Shield of Cal., 305 F.R.D. 115, 121-22 (N.D. Cal. 2014); 7A Charles Alan Wright et al., Federal Practice and Procedure § 1760 at 142-47 (3d ed. 2005). To be ascertainable, the definition of the class must be "definite enough so that it is administratively feasible for the court to ascertain whether an individual is a member" before trial, and by reference to "objective criteria." Daniel F, 305 F.R.D. at 122 (citations omitted); see also Newton v. Am. Debt Servs., Inc., No. 11-cv-3228-EMC, 2015 WL 3614197, at *5-6 (N.D. Cal. June 9, 2015) (discussing ascertainability requirement). Put differently, the Court must ensure that the class is precisely and objectively defined because defining the class with the requisite precision allows the Court to identify "the persons (1) entitled to relief, (2) bound by a final judgment, and (3) entitled under Rule 23(c)(2) to the `best notice practicable' in a Rule 23(b)(3) action." Daniel F, 305 F.R.D. at 121 (quoting Manual for Complex Litigation, Fourth § 21.222 (2004)).
Membership in the class being certified here
A plaintiff satisfies the numerosity requirement if "the class is so large that joinder of all members is impracticable." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998) (citation omitted). While no court has set the precise number of class members that are needed to satisfy the numerosity requirement, there is general recognition that Rule 23(a)(1) is at least satisfied when the proposed class contains one hundred or more members. See, e.g., Wang v. Chinese Daily News, 231 F.R.D. 602, 607 (C.D. Cal. 2005) (recognizing there is a presumption of numerosity where the proposed class contains one hundred or more members), reversed on other grounds by 737 F.3d 538 (9th Cir. 2013); Ikonen v. Hartz Mountain Corp., 122 F.R.D. 258, 262 (S.D. Cal. 1998) (finding a proposed class of forty members sufficient to satisfy numerosity). While the Court does not currently know the exact number of class members in the certified class, the Court has no doubt that at least one hundred of the roughly 160,000 individuals who drove for Uber in California since August 2009 will meet the class definition here. Notably, neither party has even suggested that numerosity is not satisfied here. And there is sufficient evidence in the record to suggest that the class being certified will number at least into the hundreds. For instance, in other litigation, Uber has alleged that "several hundred" drivers have opted out of the arbitration agreements listed in the Appendix, and further claimed that at least 269 drivers have opted-out of its earlier — contracts. See Yucesoy v. Uber Techs., Inc., No. 15-cv-262-EMC, Docket No. 107 at 7 n.5; Gillette v. Uber Techs., Inc., No. 14-cv-5241-EMC, 2015 WL 4481706, at *4 (N.D. Cal. Jul. 22, 2015) (Uber's counsel alleged that "roughly 270 drivers" successfully opted-out of earlier versions of arbitration provision). Thus, the Court finds that the numerosity requirement is satisfied.
In order to satisfy Rule 23(a)(2)'s commonality requirement, a plaintiff must "affirmatively demonstrate" that their claims depend upon at least one common contention the truth or falsity of which "will resolve an issue that is central to the validity" of each one of the class members' "claims in one stroke." Dukes, 131 S. Ct. at 2551. That is, the lawsuit must call upon the court or jury to decide at least one factual or legal question that will generate a common answer "apt to drive the resolution of the litigation." Id.; see also id. at 2556 (holding that "even a single common question" will suffice to satisfy Rule 23(a)) (citation and internal modifications omitted).
Despite Uber's argument to the contrary, there are numerous legally significant questions in this litigation that will have answers common to each class member that are apt to drive the resolution of the litigation. Most notably, the common legal issue of whether all class members should be classified as employees or independent contractors is one whose answer would not only be "apt to drive the resolution of the litigation," but could in fact be outcome determinative. See Guifu Li v. A Perfect Franchise, Inc., No. 10-cv-1189-LHK, 2011 WL 4635198, at *7 (N.D. Cal. Oct. 5, 2011) (Koh, J.). As Judge Koh properly noted when certifying a class action alleging worker misclassification under California law, if, "for example, Plaintiffs have been properly classified as independent contractors, the Court need not consider the additional claims that Plaintiffs have raised." Id. (certifying Rule 23(b)(3) class of massage therapists who had been classified as independent contractors by their putative employer, and who sought relief under various provisions of California Labor Code, including for converted gratuities under Labor Code section 351). Should the jury determine that the class members here are not Uber's employees, this class action will have reached its end. Should the jury determine they are Uber's employees, as discussed in greater detail below, they are likely to be entitled to relief as a class at least with respect to the California Tips law.
Indeed, given the threshold and determinative nature of the employment classification question, it should come as no surprise that district courts "throughout this circuit have found that commonality is met when the proposed class of plaintiffs asserts that class members were improperly classified as independent contractors instead of employees." Giufu Li, 2011 WL 4635198, at *7 (collecting cases); see also Villalpando v. Exel Direct Inc., 303 F.R.D. 588, 606 (N.D. Cal. 2014) (finding commonality established solely because "Plaintiffs assert there is a threshold issue as to all of their claims, namely, whether they are independent contractors or employees of Exel"); Bowerman v. Field Asset Servs., Inc. (Bowerman II), No. 13-cv-0057, 2015 WL 1321883, at *14 (N.D. Cal. Mar. 24, 2015) (Orrick, J.) ("Commonality is satisfied here. The key legal issue underlying this case is whether putative class members were misclassified under California law as independent contractors instead of employees . . . . [T]his is a common question that is capable of resolution for the class."); Norris-Wilson, 270 F.R.D. at 604 (holding "that whether workers are properly classified as employees or independent contractors is, by itself, a factual and legal issue that satisfies Rule 23(a)").
To be sure, it may be argued that the commonality requirement of Rule 23(a) must be examined at a level of greater specificity, and not rest solely on the general legal question of whether Uber's drivers are employees or independent contractors. Indeed, the Supreme Court has recognized that Rule 23(a)(2)'s commonality requirement is "subsumed under, or superseded by, the more stringent Rule 23(b)(3) requirement that questions common to the class `predominate over' other questions." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 609 (1997). Thus, the Court notes that its predominance analysis, conducted below, is also relevant to its determination that Rule 23(a)(2)'s "rigorous" commonality standard is met here. Dukes, 131 S. Ct. at 2551. That discussion of predominance examines in greater detail whether the specific factors which inform the Borello analysis are susceptible to common and classwide proof. As noted in that discussion, the worker classification claim presents a common issue capable of classwide adjudication because all (or nearly all) of the individual elements of the Borello test themselves raise common questions which will have common answers. Thus, even if the authorities stated above did not establish the commonality requirement of Rule 23(a) is met by the overarching common question of driver status as employee or independent contractor, commonality at a more specific level is satisfied here for the reasons discussed in the predominance analysis below.
Furthermore, the class claims here raise numerous other common questions that will have common answers apt to drive the resolution of the litigation. For instance, to prevail on their Tips Claim, Plaintiff will be required to show that Uber included a tip or gratuity in the fares it charged to its riders, but that Uber never paid these tips to its drivers. Thus, one common question important to resolving Uber's liability for the Tips Claim on a classwide basis is whether Uber ever actually remitted tips to its drivers. Importantly, Uber has stipulated that "[a] tip has never been part of the calculation of fares for either UberBlack or UberX in California," and thus admits that a common question has a common (and conceded) answer that will help establish Uber's potential classwide liability for Tips Law violations: Uber has never paid gratuities to any of its drivers. See Docket No. 313-16 at 33:22-24. Rule 23(a)(2)'s commonality requirement is therefore satisfied for this reason as well.
Rule 23(a)(3) requires that "the [legal] claims or defenses of the representative parties [be] typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). Representative claims are "typical" if they are "reasonably co-extensive with those of absent class members; they need not be substantially identical." Hanlon, 150 F.3d at 1020. Thus, the "`test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.'" Bowerman II, 2015 WL 1321883, at *15 (quoting Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992)). Moreover, courts may evaluate whether a named plaintiff is typical by determining whether she is "subject to unique defenses which threaten to become the focus of the litigation." Id. (citation omitted). "Class certification should not be granted if there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to [her]." Id. (internal modification and citation omitted).
Rule 23(a)(4) imposes a closely related requirement to typicality — namely that the putative class representative must "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). A named plaintiff satisfies the adequacy test if the individual has no conflicts of interest with other class members and if the named plaintiff will prosecute the action vigorously on behalf of the class. See Ellis v. Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011).
As other courts and commentators have noted, the typicality and adequacy inquiries tend to significantly overlap. See, e.g., Newberg on Class Actions § 3:32 (5th ed. 2015) ("Due to the related nature of the two requirements and the frequency with which they are challenged on the same grounds, many courts address the typicality and adequacy requirements in a single inquiry.").
Uber principally argues that the named Plaintiffs' claims are atypical of their fellow class members' because there is "no typical Uber driver." Opp. Br. at 35. For instance, Uber argues that "Plaintiffs, who were onboarded in San Francisco, Los Angeles, and San Diego, are not typical of drivers from other cities, or even of drivers in their own cities who were `onboarded' at different points in time or by different people." Opp. Br. at 36. Uber also argues that the representative Plaintiffs are not typical of fellow class members with respect to certain secondary elements of the common law Borello test. For example, Uber notes that none of the named Plaintiffs ever operated their own distinct transportation company, while other Uber drivers (but, importantly, no class members) have operated distinct transportation companies which contract with Uber directly.
First, to the extent that Uber's "no typical Uber driver" contention is focused on legally relevant differences between drivers under the Borello test (e.g., whether or not they operate a distinct transportation business), the argument is really a commonality or predominance argument masquerading as a typicality argument: If legally material differences between class members are so substantial that the predominance or commonality tests cannot be satisfied, then the typicality test likely cannot be satisfied either. As discussed below, however, the Court finds that the predominance test is satisfied with respect to the specific class defined above because there are not significant material legal differences between the claims and defenses of the class members and those of the named Plaintiffs. See Section II.E, infra.
As for the remainder of Uber's "no typical driver" argument, it fails because Uber focuses on legally irrelevant differences between the named Plaintiffs and class members. Rule 23(a)(3)'s test of typicality is not whether there are any differences between the representative plaintiffs and the class members they seek to represent. For example, the named Plaintiffs may all be left-handed and drive Hondas, while numerous class members are right-handed and drive Toyotas. But these differences do not demonstrate that the named Plaintiffs are not typical class representatives under Rule 23.
Norris-Wilson, 270 F.R.D. at 605 (quoting Hanon, 976 F.2d at 508). Indeed, as with commonality, typicality is almost universally found in employment cases like this one where the representative class plaintiffs allege that they, along with every other member of the class, were wrongfully misclassified as independent contractors rather than an employees. See, e.g., Giufu Li, 2011 WL 4635198, at *8 ("The typicality requirement is met here because Plaintiffs have alleged an identical injury, namely that the proposed class members were improperly classified as independent contractors and as a result they were denied a host of work-related benefits provided by California labor laws."); Bowerman II, 2015 WL 1321883, at *15 (holding typicality was satisfied because the named plaintiffs' "claims arise from the same conduct that provides the basis for all class members' claims — namely, FAS's alleged misclassification of vendors as independent contractors and consequent failure to pay overtime wages and indemnify costs"); Breeden v. Benchmark Lending Group, Inc., 229 F.R.D. 623, 629 (N.D. Cal. 2005) (typicality met where class representatives' misclassification claims are "precisely the same as the claims of the other class members"); Dalton v. Lee Publ'ns Inc., 270 F.R.D. 555, 560 (S.D. Cal. 2010) (explaining that the class representatives "performed nearly identical work as the class members. They were all classified as independent contractors, not employees. They have allegedly suffered damages similar to the class members in the form of unpaid wages and improper deductions and expenses, among other things. The named plaintiffs' claims are therefore typical of the class").
Uber's next typicality argument fares no better. Uber claims that named Plaintiff Manahan is subject to a unique defense because he "conceded" at his deposition that he "fraudulently manipulated Uber's driver referral program," thereby wrongfully obtaining $25,000 from Uber. Opp. Br. at 33. In a footnote, Uber then argues that "Manahan's fraudulent conduct . . . exposes him to a unique counterclaim for breach of contract and a unique affirmative defense of unclean hands." Id. at 33 n.21. This argument is flawed for a multitude of reasons. First, Uber has not actually pleaded a counterclaim for breach of contract against Manahan, despite the fact that his deposition was completed over a year ago. Docket No. 300 (Lipshutz Decl.), Ex. B. (Manahan Depo). Moreover, Manahan's deposition testimony is far less damning than Uber's brief implies. At best, Manahan testified that on one occasion he requested multiple rides from a Lyft driver whom he had referred to drive for Uber so that the driver would meet his necessary ride quota, and the two of them would thereby receive their respective referral bonuses from Uber.
Of course, while Uber likely cannot prove that Manahan actually committed fraud, it could conceivably use Manahan's deposition testimony about the referral program to attack his credibility should he testify at trial. Indeed, Uber argues that both Manahan and Gurfinkel
None of the named Plaintiffs' putative credibility problems are sufficiently severe so as to undermine their ability to serve as class representatives. For instance, Uber states that Colopy provided "contradictory responses" in discovery; however, the Court reviewed the cited discovery responses and found no contradiction at all. Other claimed credibility problems also appear relatively minor. For instance, in a request for admission (RFA), Manahan denied that "UBER has not established any schedule for when YOU must use the UBER APP," but later testified at his deposition that while Uber "encourag[ed] me to work busier times," Uber had never actually "set [his] schedule." Manahan Depo. Tr. at 308:20-309:1. This and other apparent contradictions between Manahan's and Gurfinkel's RFA responses and their later deposition testimony are not sufficiently serious to support a finding of inadequacy.
Uber additionally argues that Gurfinkel is an inadequate class representative because he testified at his November 2014 deposition that he does not "have any understanding as to what [his] responsibilities would be to the extent this case were to be certified as a class," did not know the name of the presiding judge, did not know precisely who the other named plaintiffs are, nor knew what motions had been filed to that point in this case. See Lipshutz Decl., Ex. D (Gurfinkel Depo.) at 33:11-17, 143:1-22. But a putative class representative will only be deemed inadequate "if she is startlingly unfamiliar with the case," and specifically lacks a "general understanding of the claims asserted." See Richie v. Blue Shield of Cal., No. 13-cv-2693-EMC, 2014 WL 6982943, at *18 (N.D. Cal. Dec. 9, 2014) (emphasis added) (citations omitted). Thus in Richie, this Court found a class representative inadequate because the putative representative could not "articulate the basic harm on which she has filed suit to recover." Id. at *19. Here, however, Gurfinkel was able to articulate the basic elements of his claim, testifying that the claims alleged in this lawsuit involve "an employer-employee relationship" and the request for payment of tips.
Finally, Uber vigorously argues that the named Plaintiffs are neither adequate nor typical of the putative class members they seek to represent because they "seek a remedy — an employment relationship with Uber — that irreconcilably conflicts with the interests of countless drivers . . . ." Opp. Br. at 30; see also id. at 3 (arguing that "Plaintiffs are taking positions directly contrary to the desires of many of the very people they claim to represent — who do not want to be employees and view Uber as having liberated them from traditional employment"). The Court rejects this argument. First, while Uber claims that "countless drivers" hail the firm as a "liberator" from traditional employment, Uber has only submitted evidence of the beliefs of a small fraction of its California drivers: 400 out of 160,000 (i.e., 0.25%). Notably, even out of these 400 declarations, Uber identified only about 150 where the driver actually stated that she prefers to remain an independent contractor. See Evangelis Decl., Ex. 10 (chart listing roughly 150 "Drivers Who Want To Be Treated As Independent Contractors With Uber"). There is simply no basis in the record supporting Uber's claim that some innumerable legion of drivers prefer to remain independent contractors rather than become employees.
Moreover, not only are the expressed views of these 400 drivers a statistically insignificant sample of the views of their fellow drivers and class members, there is nothing to suggest (and Uber does not contend) that these 400 drivers were randomly selected and constitute a representative sample of the driver population.
More fundamentally, the views expressed have little probative value to the question at hand. As the Court noted at the hearing on Plaintiffs' motion, it has doubts that most Uber drivers or declarants correctly understand the pertinent legal differences between being an employee and an independent contractor, or the potential consequences of this lawsuit. See, e.g., Docket No. 336 (Oral Arg. Tr.) at 16:19-17:25. Indeed, Plaintiffs submitted five counter-declarations from drivers who had previously provided declarations for Uber that indicate that the declarants did not understand when they provided their initial declarations that they would be entitled to expense reimbursement or other employee-only benefits if the Plaintiffs prevail on their claims here. See, e.g., Docket No. 314-1 (Beltran Decl). at ¶¶ 5-7. Furthermore, the Court's independent review of the 400 declarations seems to indicate that most (if not all) Uber drivers who reported a desire to remain independent contractors are operating under the assumption that they would lose all "flexibility" in their working relationship with Uber if they are reclassified as employees. See Oral Arg. Tr. at 16:19-17:25. But Uber has not definitely established that all (or even much) of this "flexibility" would necessarily be lost, nor has Uber even established that a victory for Plaintiffs in this lawsuit would require Uber to use "less flexible" work schedules going forward. See Smith v. Cardinal Logistics Mgmt. Corp., No. 07-cv-2104-SC, 2008 WL 4156364, at *7 (N.D. Cal. Sept. 5, 2008) ("Plaintiffs, however, are not seeking to outlaw the employment relationship of an independent contractor. Rather, Plaintiffs are alleging that the current system, as operated by Cardinal, violates California law by attempting to label Cardinal delivery drivers as independent contractors when such drivers are employees as a matter of law. Even if Plaintiffs were to eventually prevail on this claim, there would be nothing to stop Cardinal, at that point, from employing actual independent contractors, so long as such an arrangement complied with California law."). Indeed, even if Uber loses this case, it will be free to restructure its relationship with its drivers in such a way that the drivers would actually be bona fide independent contractors.
Furthermore, even if Uber had demonstrated some real tension between the goals of the class representatives and some statistically significant percentage of the class members, courts have refused to find inadequacy on these grounds. As one district judge correctly explained, "the conflicts that Rule 23(a) is concerned about are conflicts between the class representatives and other members of the putative class, not between those who do and don't think a lawsuit is a good idea in the first place. Just because potential class members disagree with the spirit of an action doesn't mean it shouldn't be certified. It will almost always be the case that some putative class members are happy with things as they are." Norris-Wilson, 270 F.R.D. at 606 (citations omitted); see also Guifu Li, 2011 WL 4635198, at *9 (holding that the fact that "some potential class members may prefer their current employment situation[] is not sufficient to defeat adequacy"); Smith, 2008 WL 4156364, at *7. Indeed, as Judge Conti correctly explained in Smith, where putative employees seek to invoke the protections afforded under California labor laws, the Court "must be mindful" of the fact that "`the protections conferred by [these laws] have a public purpose beyond the private interests of the workers themselves.'" Smith, 2008 WL 4156364, at *7 (quoting Borello, 48 Cal. 3d at 358); see also Department of Labor Administrator's Interpretation No. 2015-1, 2015 WL 4449086, at *1 (July 15, 2015) (noting as a public policy matter that "[m]isclassification also results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers"). "It would be antithetical" to the public interest embodied in California's Labor Code to permit a statistically insignificant portion of Uber's workforce "to frustrate the attempt by others to assert rights under California labor law solely because [they] are satisfied with their current jobs." Smith, 2008 WL 4156364, at *7. Moreover, if there really are class members who truly object to the goals of this lawsuit, they are always free to opt-out of this class action. See Dalton, 270 F.R.D. at 560-61.
In conclusion, the Court finds that Manahan's and Gurfinkel's Tips Claims are typical of their fellow class members' claims, and that both representative Plaintiffs are adequate class representatives.
By contrast, Plaintiffs have not demonstrated that they are adequate class representatives with respect to their expense reimbursement claim under Labor Code section 2802. That provision provides, as relevant here, that:
That is not to say, of course, that a class action can never be certified under section 2802. The opposite is clearly true. See, e.g., Dalton, 270 F.R.D. at 563-64 (certifying Rule 23 class action that included expense reimbursement claim under section 2802); Stuart v. Radioshack Corp., No. 07-cv-4499-EMC, 2009 WL 281941 (N.D. Cal. Feb. 5, 2009) (same); Shepard v. Lowe's HIW, Inc., No. 12-cv-3893-JSW, 2013 WL 4488802 (N.D. Cal. Aug. 19, 2013) (same). But certification of such claims typically requires the Plaintiff to identify "specific expenses or categor[ies] of expenses" that were incurred uniformly (or are calculable based on a common formula) on a classwide basis, and that the answers to section 2802's "necessity" and "direct consequence" inquiries will similarly be subject to common proof across the class. See Giufu Li, 2011 WL 4635198, at *14
Plaintiffs seemed to suggest in their papers, and again at the hearing, that the "main thing that we're seeking" is reimbursement for vehicle operating expenses, such as gas, maintenance and wear and tear. See Oral Arg. Tr. at 92:24-25. And Plaintiffs further suggested that the Court could utilize the Internal Revenue Service's (IRS) mileage reimbursement rate to easily determine damages on a classwide basis for their section 2802 claim.
Plaintiffs here did not make any attempt to demonstrate that the monetary value of the other types of expenses that they had previously sought to recover for absent class members in this litigation, and now would be waiving in order to obtain class certification (e.g., water bottles, gum and mints for passengers, clothing, etc. . .),
To be clear, the Court does not conclude that Plaintiffs could not make such a showing. For instance, Plaintiffs could submit an expert report or other evidence that shows that absent class members will be well served receiving the IRS mileage rate rather than receiving their actual damages. On the current record, however, the Plaintiffs have not provided the Court with sufficient information for it to be reasonably assured that what Plaintiffs purport to be giving up on behalf of the class members they seek to represent is not of such value to absent class members that the interests of those class members would be at odds with those of the named Plaintiffs. Thus, Plaintiffs have not established adequacy with respect to their expense reimbursement claim, and the claim cannot be certified at this time.
Having satisfied the Rule 23(a) criteria for their Tips Claim, the Plaintiffs must next demonstrate that the proposed class claim meets the requirements of Rule 23(b)(3), which tasks the Court with determining whether common questions of law and fact predominate over individualized issues, and whether class adjudication is superior to individual litigation of the Plaintiffs' claims. Fed. R. Civ. P. 23(b)(3) (providing a court may certify a (b)(3) class if it "finds that the questions of law or fact common to the class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy"). "The predominance test of Rule 23(b)(3) is `far more demanding' than the commonality test under Rule 23(a)(2)." Villalpando, 303 F.R.D. at 607 (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 624 (1997)). Only where "common questions present a significant aspect of the case and they can be resolved for all members of the class in a single adjudication [is] there clear justification for handling the dispute on a representative rather than individual basis." Hanlon, 150 F.3d at 1022 (citations omitted); see also Edwards v. First Am. Corp., ___ F. 3d. ___, 2015 WL 4999329, at *7 (9th Cir. Aug. 24, 2015).
Here, the Court must actually perform the predominance analysis twice. First, the Court considers whether common questions predominate over individualized issues with respect to the employment misclassification claim. "If they do not, then the inquiry ends there and class certification should be denied." Giufu Li, 2011 WL 4635198, at *12. "If, however, common questions predominate the classification inquiry," the Court then considers Plaintiffs' individual substantive claim "to determine whether [it] also pass[es] the predominance test." Id.; see also Norris-Wilson, 270 F.R.D. at 606 (following same analytical protocol); Villalpando, 303 F.R.D. at 608 (same); Soto v. Diakon Logistics (Del.), Inc., No. 08-cv-33-L(WMC), 2013 WL 4500693, at *8 (S.D. Cal. Aug. 21, 2013) (same).
The question of whether class members are employees or independent contractors under California law turns on the application of the common-law test from Borello.
Recently, the California Supreme Court issued an comprehensive opinion clarifying what putative class plaintiffs must show to demonstrate that the Borello test can be adjudicated on a classwide basis. Ayala, 59 Cal.4th 522. While the Ayala Court was considering the issue under California's state-law class action rules, the predominance requirement discussed at length in Ayala appears essentially identical to the predominance requirement under Rule 23(b)(3). Compare Ayala, 59 Cal. 4th at 530, 532-33 with Fed. R. Civ. P. 23(b)(3). Indeed, the California Supreme Court has "stated that in determining whether a class action proponent has demonstrated a predominance of common issues and manageability of the class, `we may look to the procedures governing federal class actions under rule 23 of the Federal Rules of Civil Procedure for guidance.'" Lockheed Martin Corp. v. Super. Ct., 29 Cal.4th 1096, 1121 (2003) (quoting Washington Mutual Bank, FA v. Superior Court, 24 Cal.4th 906, 922 (2001)); see also Green v. Obledo, 29 Cal.3d 126, 145-46 (1981) (explaining that it is "well established that in the absence of relevant state precedents our trial courts are urged to follow the procedures prescribed in rule 23 of the Federal Rules of Civil Procedure for conducting class actions") (citations omitted). Thus, while Ayala's considered discourse on the application of the predominance requirement in misclassification cases is not binding on this Court, it is persuasive authority that has been followed carefully by other federal courts. See, e.g., Villalpando, 303 F.R.D. at 608; Bowerman II, 2015 WL 1321883 at *9.
As the Supreme Court explained in Ayala, when evaluating predominance with respect to California's common-law test of employment, the court "must determine whether the elements necessary to establish liability [here, employee status] are susceptible to common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence." Ayala, 59 Cal. 4th at 533 (alteration in original). "Consequently, at the certification stage, the relevant inquiry is not what degree of control [Uber actually] retained over the manner and means" of its drivers' performance. Id. While under Borello, the question as to the extent of the employer's right to control (as distinct from actual control) is one which goes to the merits (see Alexander, 765 F.3d at 989; Ruiz v. Affinity Logistics Corp., 754 F.3d 1093, 1101-03 (9th Cir. 2014)), the question currently before the Court on class certification is "one step further removed: Is [Uber]'s right of control over its [drivers], whether great or small, sufficiently uniform to permit classwide assessment?" Ayala, 59 Cal. 4th at 533 (emphasis added). Put differently, "is there a common way to show that [Uber] possessed essentially the same legal right of control with respect to each of its [drivers]?" Id. Or, viewing the issue from the flip side of the same coin, did Uber's right to control its drivers "vary substantially, such that it might subject some [drivers] to extensive control as to how they [performed], . . . while as to others it had few rights and could not have directed their manner of [performance] even had it wanted, with no common proof able to capture these differences." Id. at 533-34. Thus, "[f]or class certification under the common law test, the key question is whether there is evidence a hirer possessed different rights to control with regard to its various hirees, such that individual mini-trials would be required." Id. at 536 (emphasis in original); see also Villalpando, 303 F.R.D. at 608-09; Bowerman II, 2015 WL 1321883, at *9.
Whether a putative employer has the power to dictate its hirees's work schedule is highly relevant to the right of control test. See, e.g., Alexander, 765 F.3d at 989-990; Arnold v. Mutual of Omaha Ins. Co., 202 Cal.App.4th 580, 589 (2011). Here, both parties agree that Uber does not control any of its drivers's schedules — all Uber drivers are free to work as much or as little as they like so long as UberBlack drivers give at least one ride every thirty days, and UberX drivers give at least one ride every 180 days. See Evangelis Decl, Ex. 46; see also Opp. Br. at 23 ("All drivers decide, based on their own preferences and availability, when and how much to work.") (emphasis added); Docket No. 319-3 (Uber Attorney Script) (internal document prepared by Uber's lawyers confirms that "Uber never sets drivers' schedules, [and] never requires them to log into the Uber App for any minimum amount of time") (emphases added); Docket No. 301 (McCrary Report) at ¶¶ 120-122.
Uber similarly does not dispute that it uniformly exercises no control over where its drivers work or what routes they take. See McCrary Report at ¶¶ 119-127; Uber Attorney Script (admitting that Uber "never assigns [drivers] a territory"); Docket No. 210-4 (Uber SJ. Mot.) at 20 (arguing that it is "undisputed that" Uber "did not assign [Plaintiffs] a territory"). While this fact may support Uber's position on the merits, it supports Plaintiffs' position at class certification because this factor can be adjudicated on a classwide basis.
As a number of courts have recognized, bona fide independent contractors typically have the power to set their own compensation or at least "negotiate for higher rates." Ruiz, 754 F.3d at 1101. By contrast, where the putative employer maintains a unilateral right to control the hiree's "salary," this supports a finding of employee status. See id.
Here, Uber argues that some of its drivers have negotiated to receive higher fares from Uber, but this is false. As discussed in this Court's summary judgment order, the evidence is clear that Uber sets its drivers' pay without any input or negotiation from the drivers. O'Connor, 2015 WL 1069092, at *7; see also Docket No. 313-5 (Coleman Depo.) at 165:2-21 (Uber 30(b)(6) deponent testified that he is "not aware of any negotiations that may have happened" between Uber and its drivers regarding prices); id. at 168:3-7 ("Uber sets the prices that are offered to riders and offered to drivers as well. It's certainly within either of their rights to use the system or not use the system to get connected with one another."). Indeed, Uber's own expert recognizes that "Uber is at liberty to charge the referral rate it deems appropriate." McCrary Report at ¶ 169. Uber's arguments to the contrary, therefore, are wholly without merit.
Uber suggests that it "uses `surge pricing' as a form of negotiation to bid up compensation and entice drivers to log in and accept ride requests." Opp. Br. at 24. Even if true, this is not evidence that Uber does not unilaterally maintain the right to control it drivers' compensation, or that drivers can actually negotiate over their compensation with Uber. The evidence is undisputed that, as with its "normal fares," the "surge pricing" fare is unilaterally set by Uber, not by individual drivers — there is no "negotiation" between Uber and Uber drivers over fares. If Uber wants to raise prices, it raises prices. If Uber wants to lower prices, it lowers prices. Put simply, it is Uber that sets the price, and drivers either accept Uber's offered piece rate or do not. See McCrary Report at ¶ 140 (Uber's expert notes that all drivers "earn money piece rate when they take driving jobs").
Uber's alternative suggestion similarly misses the mark. Uber suggests that drivers have the power to negotiate their own fares with riders because they can turn off the Uber application before a ride is complete. As Professor McCrary put it, quoting from one of Uber's 400 driver declarations, certain Uber drivers may be "`very soft-hearted and [] will give people a few miles for free. I will turn off the app and let them have a few free miles if I've enjoyed the conversation and we've had a nice time.'" McCrary Report at ¶ 143. Of course, Uber does not submit proof to indicate how many of its drivers are "very soft-hearted," or how many regularly turn off the meter early as some sort of price negotiation.
Uber claims in its opposition brief that "Uber does not limit drivers' ability to seek and obtain employment with third-party employers . . . ." Opp. Br. at 7. Indeed, in the script Uber's attorneys used to solicit driver declarations, Uber admitted that it "never restricts [drivers] from engaging in another occupation or business, and never restricts them from simultaneous use of other apps like Lyft and Sidecar."
The evidence shows that Uber provides its drivers with various training materials when they first sign up to become drivers during a process Uber calls "onboarding." Uber admits that all drivers "must attend" some onboarding training "before they begin to use the Uber App," Opp. Br. at 5, but claims that the content of these training sessions has varied considerably from city to city and over time. Thus, Uber claims that determining what "suggestions" it has given its drivers regarding how to perform well as an Uber driver cannot be manageably analyzed on a classwide basis. This argument misses the point, however. As the California Supreme Court has made clear, whether Uber "varied in how it exercised control does not answer whether there were variations in its underlying right to exercise that control . . . ." Ayala, 59 Cal. 4th at 534 (emphasis in original). The fact that some Uber drivers in 2009 may have been trained to drive with their radio set to NPR or smooth jazz, while in 2013 others were told (or, as Uber prefers, "suggested") to drive with their radio off or set to a classical music station, does not determine whether Uber uniformly maintained the right and power to actually monitor and enforce its drivers' compliance with whatever "requirements" or "suggestions" Uber gave, regardless of their precise content. See, e.g., Docket No. 223-6 (undated Uber SF Onboarding Script including statements such as "[m]ake sure the radio is off or on soft jazz or NPR," and "You should NOT contact the client for any reason AFTER the trip, except for lost items"); Docket No. 223-20 (undated Uber training materials stating, among other things, "no papers in visor," "front seat forward," "rims are spotless," and telling drivers not to "forget to shower"). In any event, there is evidence in the record of Uber promulgating some consistent and significant rules that have applied to all drivers throughout the class period. See, e.g., Docket No. 223-13 at 8 (Uber prohibits "client solicitation" or otherwise asking an Uber "client to become a client of your private car service business").
Uber's right to control its drivers' actual performance can be evaluated on a common basis by considering Uber's uniform ability to monitor that performance. Uber does not dispute that it collects extensive performance data regarding all of its drivers, and asks riders to rank all drivers' performance after each ride on a one-to-five scale. See, e.g., Coleman Decl., Ex. K at § 11.2 (contract providing Uber the right to "collect, use, and share precise geo-location data" of its drivers for the "analytical, marketing and commercial purposes of Uber"); id. at § 4.3.3 (contract providing that "Uber utilizes a five-star rating system designed to allow the Users of its Software to provide feedback on the level of service provided" by its drivers and stating that "there is a minimum star-rating Drivers must maintain to continue receiving access" to the Uber application). Uber does not claim that only some of its drivers are subject to such monitoring while others are not — rather, all Uber drivers are subject to being monitored via star ratings and Uber's application data. Such evidence of employee monitoring is relevant to the "right to control" inquiry, see Alexander, 765 F.3d at 990, and the fact that Uber has a uniform right to monitor its drivers' performance supports adjudicating the misclassification question on a classwide basis. Ayala, 59 Cal. 4th at 536.
There can be no dispute — Uber maintains a uniform ability to monitor certain aspects of its drivers' performance, principally through the star rating system and other rider feedback provided to Uber through the application, and the evidence further shows that Uber actually uses this information to reprimand or terminate drivers who do not meet Uber's standards. See, e.g., Docket No. 238-2, Ex. 23 (Uber spreadsheet listing drivers who received performance warnings or were deactivated from the Uber application because of low star ratings or as a result of other complaints Uber received from riders through the application); Docket No. 238-5, Ex. 27 (email from Uber terminating driver, and explaining that Uber makes its termination decision "based heavily on feedback from our customers. Unfortunately, with a rating of 4.1 stars, your account is in the bottom 5% of our active drivers, and with a number of outstanding client issues we had no choice but to deactivate [your account]"); Docket No. 223-24 (email from Uber threatening driver with termination for accepting cash tips). Thus, common evidence probative of Uber's right to monitor and control driver's performance weighs in favor of class certification.
As noted above, a putative employer's right to discharge a hiree at will, without cause, is "[p]erhaps the strongest evidence of the right to control." Ayala, 59 Cal. 4th at 531. Here, Plaintiffs contend that Uber has uniformly retained the right to discharge all of its drivers at will, citing provisions in Uber's contracts with its drivers that purport to give Uber that very right. To the extent that Uber has uniformly retained a right to discharge its drivers at will in its standardized form contracts, this factor weighs heavily in favor of class certification. See Ayala, 59 Cal. 4th at 534 (explaining evidentiary importance of form employment contracts); Villalpando, 303 F.R.D. at 608 (recognizing that "uniform contracts are a significant focus of the `right to control' inquiry") (citing Alexander, 765 F.3d at 989-94 and Ruiz, 754 F.3d at 1102).
Uber argues that Plaintiffs cannot manageably show that Uber retained a uniform right to terminate its drivers at will for at least two reasons. First, Uber argues that there are simply too many contracts — seventeen different versions in all — that could have possibly governed the relationship between Uber and the class members. See Opp. Br. at 14. More importantly, however, Uber claims that the various provisions of these 17 agreements changed materially over time. For instance, Uber claims that in eight of the seventeen contracts, the parties "reserve a mutual right to terminate for both Uber and the driver,"
Of the seventeen contracts, fifteen have been promulgated since 2013. Careful review of these contracts shows that each one contains at an at-will termination clause, although the precise language employed is somewhat different between some of the contracts. For instance, the July 2013 Software License and Online Services Agreement provides that "[t]his Transportation Company Agreement shall commence on the date this Agreement is accepted, for an indefinite period of time, unless terminated by either party by written notice with due observance of a notice period of seven (7) calendar days." Coleman Decl., Ex. D at § 9.1; see also id. at Ex. H at § 9.1(same language in December 2013 version of contract); Id., Ex. K at § 9.1 (same language in June 21, 2014, version of contract); id., Ex. P at § 12.2 (November 2014 Rasier agreement providing that either party may terminate "without cause at any time upon seven (7) days prior written notice"); id., Ex. Q at § 12.2 (same language in April 2015 Uber agreement). Similarly, various Rasier "Transportation Provider Service Agreements" provide that the contract may be terminated "[b]y either party without cause upon thirty (30) days' prior written notice to the other party." Id., Ex. C at 10; see also id., Ex. F at 9 (same); id., Ex. G at 9 (same); id., Ex. J at 9 (same); id., Ex. M at 10 (same). Thus, for eleven of the seventeen potential contracts, Uber clearly retained a uniform right to unilaterally terminate its drivers without cause, the only difference being whether Uber was required to give seven or thirty days notice of its unilateral termination decision.
Uber similarly retained a unilateral termination right in its four "driver addenda." Three of these driver addenda provide that "Uber reserves the right, at all times and at Uber's sole discretion, to reclaim, prohibit, suspend, limit or otherwise restrict the Subcontractor from accessing or using the Driver App or the Device if the Transportation Company or its Drivers fail to maintain the standards of appearance and service required by the users of the Uber Software." Colman Decl., Ex. E at § 2.1 (emphasis added); id., Ex. I at § 2.1 (same); id., Ex. L at at § 2.1 (same). And the fourth driver addendum similarly provides Uber the right to unilaterally terminate drivers without cause, providing that a "[d]river may be deactivated or otherwise restricted from accessing or using" the Uber application for any "reason at the reasonable discretion of Uber." Id., Ex. O at at § 2.3. Put simply, the driver addenda permit Uber — in either its "sole" or "reasonable" (but either way unreviewable) discretion — to terminate a driver with no notice whatsoever.
At bottom then, fifteen of the seventeen potentially applicable contracts in this case (and all of the contracts issued to drivers from roughly February 2013 onwards) contain express language that provides Uber with a right to terminate any and all drivers without cause. The only variation between the contracts is immaterial under the "right-of-control" test — whether Uber can fire its drivers at will without notice, with only seven days notice, or with thirty days notice. See Shepard, 2013 WL 4488802, at *4 (noting that while there were "minor differences among the contracts for the types of installers and . . . [provisions which] changed over time, the variations do not effect the issue of Defendant's right to control") (citation and internal quotation marks omitted). And even if these differences were somehow potentially material, Plaintiffs have presented evidence that Uber does not in practice differentiate between contracts in terminating drivers. See Docket No. 313 (Liss-Riordan Decl.), Ex. 3 (Graves Depo.) at 185:25-186:8 (testimony of Uber's former CEO that he is not aware of Uber having any method to ascertain which of its seventeen contracts applies to a given driver in order to determine "whether or not that driver can be deactivated in Uber's discretion"). The fifteen contracts the Court has discussed are therefore probative common proof that Uber has maintained a uniform right to unilaterally terminate its drivers without cause throughout much of the class period.
This leaves for consideration only the two additional contracts that were in place between Uber and its drivers until early 2013. See Colman Decl., at Exs. A and B. Uber notes that these contracts are entirely silent as to whether Uber had the right to unilaterally terminate its drivers. See Evangelis Decl., Ex. 53 (conceding that these contracts do not say one way or another whether Uber could terminate a driver without cause). This is not helpful to Uber, however, because California law is clear that there is a "statutory presumption of at-will employment" where an agreement is otherwise silent as to whether the employer can only terminate with cause. See Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 335 (2000) (describing California's statutory presumption); Cal. Lab. Code § 2922 ("An employment, having no specified term, may be terminated at the will of either party on notice to the other."). Neither of Uber's pre-2013 contracts contain a for-cause termination requirement, and neither have a "specified term." See Colman Decl., at Exs. A and B. Thus, Uber retained a uniform right to terminate all of its drivers at will under these contracts as well.
In sum, all seventeen of Uber's contracts provide Uber with the right to unilaterally terminate its drivers without cause. This common proof will allow this important factor in the Borello test to be analyzed on a classwide basis without individualized inquires. Thus, this factor weighs heavily in favor of class certification.
Uber also argues that analysis of the Borello secondary factors is not possible on a classwide basis. Uber is wrong. In fact, it appears every single Borello secondary factor can be adjudicated on a classwide basis using common proof.
Uber strenuously argues that a class cannot be certified here because the very first Borello factor is not subject to resolution with common proof across the class. Uber's argument is correct up to a point. The Plaintiffs' original proposed "mega-class" of all Uber drivers who have ever driven for Uber since 2009 likely cannot be certified because, as Uber persuasively argues, there would be tremendous (and likely material) variance between those class members who held themselves out as a distinct business — or contracted to drive for Uber indirectly through a distinct third-party business that had itself contracted with Uber to provide driving services — and those who did not.
Nor can the Court say with confidence that a driver like putative named Plaintiff Colopy — who is not actually a member of the class being certified herein — is sufficiently similar to Gurfinkel and Manahan to conclude that the first Borello test would have a common answer between these three drivers. Colopy drove for Uber through two different independent limousine companies that had themselves contracted to provide services to Uber. He did not drive exclusively Uber — Colopy also provided transportation services to the limousine companies' clients. See Colopy Depo. Tr. at 59:16-60:16. By contrast, Manahan and Gurfinkel contracted directly with Uber and are paid directly by Uber.
That is not to say that the Court is necessarily foreclosing class certification for drivers who drove for third-party transportation companies, although further subclassing might be necessary if Plaintiffs are to demonstrate that an additional class (or classes) of such drivers can be certified under Rule 23(b)(3). For instance, Uber has submitted evidence that some portion of its drivers who drive through third-party transportation companies only render service to Uber clients, or service substantially more Uber clients than clients obtained through other sources. See, e.g., Docket No. 307 at 394 (Ezzikhe Decl.) (indicating that "100% of my business comes from leads generated through the Uber App"); id. at 452 (Gebretensia Decl.) (same); id. at 470 (Girma Decl.) ("The Uber app makes up about 90% of my business"); id. at 286 (Collins Decl.) (same). While such drivers technically drive for distinct businesses, in reality they appear to be largely (if not entirely) economically dependent on Uber for their livelihoods. See, e.g., Messenger Couriers Ass'n of Am. v. California Unemployment Ins. Appeals Bd., 175 Cal.App.4th 1074, 1092 (2009) (suggesting that the Borello analysis requires the court to consider "criteria such as the economic dependence of the worker" on the putative employer). By contrast, other Uber drivers who work for third-party transportation companies may derive a much smaller portion of their business from Uber. See, e.g., Docket No. 307 at 378 (Enriquez Decl.) ("I would say that 30% of my revenue comes from Uber."); id. at 45 (Alshara Decl.) (same). While the Court is not currently willing to certify these drivers as a group as class members, it is possible Plaintiffs could demonstrate that some such drivers could participate in a class action via an appropriately defined subclass or subclasses where there are no material variations within such subclass. At this point in the litigation, the Court is simply holding that drivers who drove for third-party transportation companies cannot as a group be members of the same class as Uber drivers who contracted with Uber directly, and did not operate or work for a distinct business entity while driving for Uber.
At the hearing, Plaintiffs belatedly proposed certain subclasses that they claim could eliminate any predominance issues with respect to drivers who serve Uber clients through third-party transportation companies. For instance, Plaintiffs suggested that the Court could certify a subclass of all drivers who operated or worked for a third-party transportation company and who performed services for Uber full-time (e.g., 30 or more hours per week). While it is conceivable that a group of such drivers who drive essentially full time (however that is defined) for Uber may present a subclass that meets commonality and predominance requires (see Bowerman II, 2015 WL 1321883, at *1, 10-11), the Court today denies Plaintiffs' request to certify such a subclass (or other possible subclasses) without prejudice. Plaintiffs have not met their burden to demonstrate that such a class would be certifiable. Notably, Plaintiffs have not offered a concrete proposal regarding how the members of any such subclass (or classes) could be identified for ascertainability purposes. For example, Plaintiffs have not submitted any proof that they could objectively identify all drivers who drove for Uber more than 30 hours per week. Alternatively, if a subclass were to be defined by the percentage of rides given to Uber customers versus customers obtained from other sources, Plaintiffs have not shown that they could objectively determine whether a driver was more like Ezzikhe or Gebretensia (i.e., drive solely for Uber) or more like Enriquez or Alshara (i.e., drive for Uber about 30% of the time).
Importantly, the possible predominance problems identified immediately above do not affect the class certification analysis for the class the Court is actually certifying herein. Specifically, the class as defined does not present a predominance problem with respect to the "distinct business" factor because all drivers who operated or drove for a third-party transportation company — as opposed to driving directly for Uber itself or one of its wholly-owned subsidiaries — are currently excluded from the class defined in this order. Clearly, there can be no material classwide variation with respect to the "distinct business" Borello factor to the extent that all drivers who signed up to drive for Uber as a "distinct business,"
There can be no question that the answer to this Borello secondary factor will be common to all class members. Here, the "kind of occupation" at issue (i.e., driver) is the same for every class member. And Uber has presented no evidence that drivers in some locations are typically supervised while they drive, while drivers in other locations are "specialists" who can drive without supervision. Indeed, Uber argued at summary judgment that each named Plaintiff was a specialist who drove passengers without supervision. Uber SJ. Mot. at 24. The named Plaintiffs drove for Uber in San Francisco, Los Angeles, and San Diego, respectively. Uber essentially concedes it does not believe that the second Borello factor varies by location; it certainly has presented no evidence of such variation. The second Borello factor will have a common answer to all class members. See Ayala, 59 Cal. 4th at 538 ("In a case where every class member performs the same tasks, some factors will always be common, such as the kind of occupation and the skill it requires.") (emphasis added) (citation omitted).
The third Borello factor will also have a common answer for all class members. All Uber drivers share the same occupation (driver), and Uber does not argue that the "skill required" of its drivers varies from driver to driver or location to location. Nor is there evidence in the record that the level of skill required of Uber drivers varies between class members. For instance, Uber does not require a special type of license for any of its drivers. This factor can be adjudicated on a classwide basis.
The fourth Borello secondary factor can be adjudicated on a classwide basis. There is no dispute that all drivers have to provide their own vehicles. See, e.g., McCrary Report at ¶ 151 ("Uber does not provide drivers with a vehicle."). Similarly, there is no dispute that Uber does not provide a "place of work" for its drivers. Uber drivers work in the cars that they themselves provide.
Indeed, the only equipment Uber offers to its drivers is a smartphone to access the Uber application. McCrary Report at ¶ 151. Not all Uber drivers take Uber up on this offer — some provide their own phones, while others lease a phone through Uber. Id. On the current record, it is unclear whether the number of Uber drivers who lease a smartphone from Uber is large (e.g., 50% of the class) or small (e.g., 1% of the class). If it is the latter, any individual variation would have minimal impact on class certification. Moreover, the fact that some drivers lease the phone from Uber does not mean that Uber is providing the phone; if the driver has to pay for the use of the phone, as a financial matter, it is the driver, not Uber that is supplying the phone. And even if there were significant classwide variation as to who actually provides a driver's smartphone, this issue simply is not sufficiently material to be an impediment to class certification. See Ayala, 59 Cal. 4th at 539 (holding that "[w]hen the issue of common law employment is involved," the weighing of Borello's secondary indicia "must be conducted with an eye to the reality that the considerations in the multi-factor test are not of uniform significance . . . . The proper course, if there are individual variations in parts of the common law test, is to consider whether they are likely to prove material").
As the cases make clear, the real heart of the inquiry under the fourth Borello secondary factor is the relative investment in equipment as between the putative employer and the laborer. See Alexander, 765 F.3d at 995 (finding that this Borello factor favored FedEx because drivers provided the more costly equipment, such as delivery trucks, while FedEx made significantly less expensive equipment available to drivers, such as package scanners); Borello, 48 Cal. 3d at 346, 355, 357 (requiring the Court to consider the "employee's investment in equipment or materials required for his task," and noting in that specific case that the sharefarmers "invest nothing but personal service and hand tools," whereas the putative employer made significant investments in land, transportation of crops to market, and the like); Restatement (Second) of Agency § 220 cmt. k (noting that "if the worker is using his employer's tools or instrumentalities, especially if they are of substantial value,. . . this indicates that the owner is a master") (emphasis added); see also Department of Labor Administrator's Interpretation No. 2015-1, 2015 WL 4449086, at *7-8 (explaining that courts in the analogous FLSA context "consider the nature and extent of the relative investments of the employer and the worker"). Here, the relative investment in tools and equipment is reasonably discernable on a classwide basis — all drivers invest considerably more in tools and equipment by obtaining their own vehicle than Uber does by arguably providing certain of its drivers with a smartphone. Thus, the Court finds that the fourth Borello factor can be adjudicated on a classwide basis.
Uber argues that this Borello factor cannot be adjudicated on a classwide basis because "[d]rivers' usage of the Uber App varies dramatically. Some rarely use the App . . . [while] [o]thers use the Uber App more than 60 hours per week." Opp. Br. at 4. This argument is meritless with respect to this factor for at least two reasons.
First, it is irrelevant.
Narayan, 616 F.3d at 903. Whether some Uber drivers work longer days than others is simply not relevant to this determination.
Second, even if Uber had made (and substantiated) the correct argument with respect to this factor — that some of its drivers only remain Uber drivers for a relatively short period of time (i.e., give a couple of rides and then quit) while others (like the named Plaintiffs) drive with the company for years — it would make no material difference relative to this Borello factor. It is undisputed that Uber's contracts provide that the relationship between Uber and its drivers is open-ended and could have an infinite duration. See, e.g., Coleman Decl., Ex. D at § 9.1 ("This Transportation Company Agreement shall commence on the date this Agreement is accepted, for an indefinite period of time, unless terminated by either party . . . ."); id., Ex. F at 9 (no set duration to relationship between driver and Uber); id., Ex. Q at § 12.1 (same); Uber SJ. Mot. at 25-26 (conceding that Uber's contracts with drivers are "long-term or indefinite"). And there is no evidence in the record that, contrary to the contract rights, Uber actually terminates any of its drivers after some specified term has expired, or otherwise restricts its drivers' ability to use the Uber application after some specific set period of time has elapsed.
This Borello secondary factor will have an answer common to the class, and is thus capable of classwide resolution. There is no dispute that all Uber drivers are paid by the job, as Uber's own expert admits. See McCrary Report at ¶ 140 ("Drivers contracting with Uber earn money piece rate when they take driving jobs."). Uber's only response is contained in the following sentence from its opposition brief: "Drivers are generally compensated on a per-ride basis by Uber, but others may have different terms depending on their relationship with Uber partners and whether the partners provide vehicles and cover the drivers' expenses." Opp. Br. at 23. This is immaterial to this Borello secondary factor as to the class certified herein. The class as currently defined only includes drivers who were paid directly by Uber, and all drivers who are paid directly by Uber are paid on a per-job basis.
As this Court has already found, Uber's business is the business of transportation. See O'Connor, 2015 WL 1069092, at *6 (holding that "it is clear that Uber is most certainly a transportation company"). It is equally clear that Uber drivers are also in the transportation business. This factor has a common answer — the drivers' work is part of the regular business of Uber — and thus this factor can be adjudicated on a classwide basis.
Uber argues that the eighth Borello factor cannot be adjudicated on a classwide basis because its drivers likely had different subjective expectations as to whether they were creating an employment or independent contractor relationship with Uber when they first signed up to drive for the company. Opp. Br. at 22. The Court disagrees. Notably, Uber has provided no evidence that any of its drivers actually had varying subjective expectations regarding their employment status at the time of contracting. For instance, while Uber provided the court with a chart listing every one of its 400 declarants who "intended to create an independent contractor relationship with Uber," the company submitted no corresponding chart indicating that even a single one of its declarants "intended to create an employment relationship with Uber."
Indeed, the evidence overwhelmingly indicates that all Uber drivers likely understood themselves to be agreeing to be independent contractors when they first signed up to drive for Uber. Most probatively, every version of Uber's contracts with its drivers states clearly and expressly that the parties intend to form an independent contractor relationship; not an employment relationship. See, e.g., Coleman Decl., Ex. A. at 9574 (disclaiming any employment relationship in Uber's first driver contract); id., Ex. Q at § 13.1 (disclaiming any employment relationship in Uber's most recent driver contract). Moreover, Uber has previously admitted that it "never provided" drivers with "any employment benefits, and never reported their earnings on a Form W-2." Uber SJ Mot. at 2. Thus, all drivers were confronted with the same set of circumstances when they signed up with Uber.
Moreover, the California Supreme Court in Ayala cautioned that the relevant inquiry with respect to this particular Borello factor may depend not just on the subjective beliefs of the parties, but on "general custom with respect to the nature of the work." Ayala, 59 Cal. 4th at 538. The Court explained:
Id. (citation omitted). Community custom is likely informed by facts commonly applicable to the class.
Finally, even if there were individual variance with respect to this factor, it would still not defeat class certification because this particular Borello secondary factor is entitled to the least weight of all of the various factors. As the Borello opinion itself makes clear, "[t]he label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced." Borello, 48 Cal. 3d at 349. Indeed, in Alexander the plaintiffs formally admitted that they all "intended to enter into an independent contractor relationship" with FedEx when they were first hired, and nevertheless the Ninth Circuit held that they were employees as a matter of law. See Alexander, 765 F.3d at 996-97; see also JKH Enters., Inc. v. Dep't of Indus. Relations, 142 Cal.App.4th 1046, 1064 (2006) (recognizing that "neither JKH's nor the drivers' own perception of their relationship as one of independent contracting" is dispositive or particularly important when balanced with the remaining Borello factors); Grant v. Woods, 71 Cal.App.3d 647, 654 (1977) ("[T]he belief of the parties as to the legal effect of their relationship is not controlling if as a matter of law a different relationship exists."). Because this factor is typically not entitled to significant weight, Uber could not defeat class certification even if it had established that some of its drivers had a different subjective understanding of the parties' relationship than others.
Uber argues that this Borello secondary factor cannot be adjudicated on a classwide basis because some Uber drivers employ "driving strategies" in an effort to maximize profits, while others do not. Opp. Br. at 23-24. For instance, Uber notes that some drivers "target geographic regions that tend to have higher demand, drive during hours when demand is at its peak, or drive when `surge pricing' is available. On the other hand, some drivers . . . drive when and where they are available, regardless of demand or surge pricing."
As noted above, class members' investment in equipment or materials is the same on a classwide basis — there is no dispute that all drivers provide their own equipment, including vehicles, with the possible exception of some unspecified portion of class members who might lease a smartphone from Uber. And even in that instance, it appears that it is the driver who is the party providing the phone because the driver pays to lease it from Uber. The Court finds that any such variation is either non-existent or immaterial to the class-certification analysis, and that common questions predominate with respect to investment in equipment or materials. See Section II.E.1.g.iv, supra.
Uber argues, however, that there is still considerable variance among class members with respect to this Borello secondary factor because a number of Uber drivers employ helpers (i.e., hire subcontractors), while others do not. Uber argues that this difference is highly material to the class certification analysis, and that variance on this Borello factor defeats predominance. The Court disagrees.
First, it is important to note that Uber purports to allow all of its drivers to hire subcontractors. There is no evidence in the record that Uber permits some drivers to hire helpers, while prohibiting others from doing so. Thus, Uber's right to control class members' employment of helpers is uniform across the class.
More importantly, however, the fact there may be variance as to whether class members actually employ helpers is immaterial to the weighing of the Borello factors in this specific case. The law is clear that where the principal retains the right to "approve all helpers, this [is] indicative of control of the details of the drivers' performance under California law." Alexander, 765 F.3d at 994 (citing Narayan, 616 F.3d at 902). That is, the tenth Borello factor may weigh in favor of finding employee status even if a putative employee has hired subcontractors, so long as the subcontractors hired were subject to the principal's approval and control. As the Ninth Circuit explained in Alexander, citing other recent Ninth Circuit case law:
Alexander, 765 F.3d at 994. (internal modifications omitted).
As the above-cited cases make clear, a worker's right to hire subcontractors (or the worker's actual utilization of subcontractors) is only indicative of a bona fide independent contractor relationship where the putative employer does not retain the right to approve the worker's choice of subcontractors and where the putative employer does not retain the right to subject the worker's chosen subcontractors to the "same degree of control" as the worker herself. See Alexander, 765 F.3d at 994.
The evidence here demonstrates that Uber maintains a uniform right to approve its drivers' chosen subcontractors. And it is undisputed that Uber maintains the very same right to control the performance of its drivers' chosen subcontractors as it does over the drivers themselves. See, e.g., Uber SJ. Mot. at 9 (stating that the "Licensing Agreements expressly provide that: . . . [t]he transportation companies' employees and subcontractors are bound by the terms of the Licensing Agreements") (emphasis added). For instance, the record shows that drivers are flatly prohibited from "[a]llowing someone else to drive under your Uber account," which is characterized as a "zero tolerance" event. Docket No. 223-13 at 8; see also Docket No. 238-1 at 2 ("[Y]our account has been deactivated permanently due to receiving reports that you have been sharing your account with other drivers. This is not an acceptable practice, as all of our drivers must go through the application process for safety reasons.") (emphasis added). Moreover, Uber's contracts with its drivers mandate that any driver/entity who wants to hire a subcontractor must have that subcontractor sign one of Uber's "Driver Addenda," which contracts state that the subcontractor must bind herself to the very same contract with Uber as the "hiring" driver/entity. See, e.g., Coleman, Decl., Ex. D. at § 1.8 ("`Driver Addendum' means the applicable terms and conditions that Transportation Company is required to enter into with all Drivers prior to allowing access to the Software and Uber Services . . . By consenting to this agreement, You are consenting to the Driver Addendum."); id., Ex. E (Driver Addendum) at § 1 ("As a condition of receiving trip requests though the Service, Subcontractor hereby acknowledges and agrees to be bound by the Software License and Online Services Agreement between Transportation Company and Uber . . . ."); see also id. at § 2.1 (providing Uber with the right to fire subcontractors in its "sole discretion" if the subcontractor does not meet standards set by Uber). Uber exercises a veto right over all subcontractors, and subjects all subcontractors to the exact same level of control as all of its other drivers. Under such circumstances, therefore, whether a class member actually employs helpers or not will likely have no impact on the Borello analysis — either the class member does not hire helpers or the class member does hire helpers who must be approved and are monitored by Uber; in either case, this Borello factor would appear to weigh in favor of a finding of employee status. More importantly, whatever its probative value on the merits, there are no material variances in this factor which defeat predominance.
The answer to this Borello factor will be common to all class members. Either the jury will decide that all Uber drivers require special skills to drive for Uber, or not. See Ayala, 59 Cal. 4th at 538 ("In a case where every class member performs the same tasks, some factors will always be common, such as the kind of occupation and the skill it requires.") (emphasis added) (citation omitted). Uber has not argued to the contrary. Because there will be no variation between class members with respect to this factor, it supports class certification.
As noted above in subsection (e), Uber's contracts and course of dealing indicate that this factor can be resolved uniformly on a classwide basis — Uber drivers are not hired to work for specific terms. Rather, they are hired for an unspecified and indefinite period. See, e.g., Coleman Decl., Ex. D at § 9.1 ("This Transportation Company Agreement shall commence on the date this Agreement is accepted, for an indefinite period of time, unless terminated by either party . . . .").
The last of Borello's secondary factors will also have a common answer, and it is one that is already known. As this Court previously found as a matter of law, "Uber's drivers provide an `indispensable service' to Uber, and the firm `could no more survive without them' than it could without a working smartphone app. Or, put more colloquially, Uber could not be `Everyone's Private Driver' without the drivers." O'Connor, 2015 WL 1069092, at *8. Even if the jury were permitted to reach its own conclusion on this factor, there can be no dispute that the question admits no individual variation. The question is not whether a particular driver is an integral part of Uber's business, but whether the "service rendered" by the drivers (i.e., driving) is integral to Uber's business. This factor can be adjudicated on a classwide basis.
At bottom, it appears that common questions will substantially predominate over individual inquiries with respect to class members' proper employment classification under the Borello test. Indeed, every (or nearly every) consideration under the California common-law test of employment can be adjudicated with common proof on a classwide basis. Some may favor Plaintiffs' position on the merits, while others support Uber's. But all favor certification. Thus, this portion of the Rule 23(b)(3) inquiry weighs strongly in favor of class certification.
Because the threshold question of class members' employment status can be adjudicated on a classwide basis, the Court must next consider whether class members' substantive claim for withheld/converted tips under Labor Code section 351 is susceptible to classwide adjudication. The Court concludes that it is.
Labor Code section 351 provides that "[n]o employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron . . . ." Cal. Lab. Code § 351. Determining Uber's liability under section 351 will require the jury to consider two issues. First, did Uber "take, or receive any gratuity" from its riders? And second, if Uber has "taken or received" such gratuities, has Uber "paid" or "given" the full amount of those tips to its drivers? Here, both questions can be answered by common proof, and thus Rule 23(b)(3)'s predominance test is met.
Plaintiffs have cited extensive evidence that Uber has consistently and uniformly advertised to customers that a tip is included in the cost of its fares (i.e., evidence that Uber "takes or receives" a gratuity). See, e.g., Docket No. 277, Ex. 12 (November 2011: "When the ride is over, Uber will automatically charge your credit card on file. No cash is necessary. Please thank your driver, but tip is already included.") (emphasis added); Ex. 16 (November 2011: "All Uber fares include the tip.. . .") (emphasis added); Ex. 13 (May 2012: "There's no need to hand your driver any payment, and the tip is included.") (emphasis added); Ex. 14 (January 2013: "With UberBlack, SUV, and UBERx there is no need to tip. With Uber TAXI we'll automatically add 20% gratuity for the driver.") (emphasis added); Ex. 15 (April 2015: "payment is automatically charged to a credit card on file, with tip included") (emphasis added).
Moreover, Uber has stipulated for the purposes of this litigation that, despite its representations that a "tip is included," a "tip has never been part of the calculation of fares for either UberBlack or UberX in California." See Docket No. 313-16 (emphasis added). That is, Uber essentially admits that despite making allegedly consistent and uniform representations to customers that a tip was included in all of its fares, Uber never actually calculated such a tip, and clearly never segregated and remitted any tip amount to drivers.
Uber argues otherwise, but as Plaintiffs rightly point out, Uber's arguments are all premised on a fundamental misunderstanding of section 351 and Plaintiffs' Tips Claim. For instance, Uber argues that "[t]o the extent some drivers would not have received tips — regardless of Uber's `policies' — those drivers have suffered no injury and have no Article III standing." Opp. Br. at 26. Under Plaintiffs' theory, however, no such drivers exist; Uber's alleged practice was to charge every rider for a tip ("tip is included") on every ride. Plaintiffs' claim is that after charging every rider for a tip, Uber then failed to pay any of those gratuities to the drivers. See Reply Br. at 15 (explaining that Plaintiffs' theory is that all passengers "actually paid tips (because they were labeled as such), but they were never remitted to drivers"). The fact that some drivers, but for Uber's alleged forced tipping practice, might not have been tipped by a particular rider left to his or her own devices is immaterial to Plaintiffs' claim.
Similarly, Uber's argument that some drivers receive/received cash tips from passengers (in addition to those allegedly collected by Uber) is irrelevant to either the class certification analysis or the merits of Uber's liability under section 351. Under Plaintiffs' theory of the case (and more importantly, under the language of section 351 itself) any cash tips that were paid to drivers would simply be an additional gratuity that the customer provided to the driver over and above the tip that Uber already charged to the rider (i.e., the tip that Uber allegedly advertised was "included" in the fare). Nowhere in the language of section 351 did the Legislature provide that an employer can withhold a portion of an employee's gratuity that was paid directly to the employer as some sort of set-off against an additional gratuity that the patron paid to the employee directly. See Cal. Lab. Code § 351 ("No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.") (emphasis added).
Uber relatedly contends that class certification is not appropriate on the Tips Claim because a jury cannot determine damages without conducting a host of individualized inquires. Specifically, Uber argues that class certification is inappropriate because the precise amount of any gratuity that a rider would have paid his driver varies dramatically from ride-to-ride depending on driver performance and other variables. Opp. Br. at 26. This argument misses the mark for a few reasons. First, Uber fails to recognize that it has never given riders the ability to change the amount of the "included" tip that Uber allegedly charges passengers. Rather, if one credits the Plaintiffs' evidence, Uber tells riders that some unspecified tip is being unilaterally imposed by Uber, and riders have no power to change this amount for any reason. Because the tip is unilaterally set by Uber without any possible input from riders, there is no reason to suspect that the "included tip" amount would vary from ride-to-ride based on driver performance or any other factor. A poor performing Uber driver would receive the exact same tip as a high-performing driver because Uber has never given riders the ability to actually vary the tip amount it charges them.
Moreover, Uber cannot defeat class certification simply because individualized damages might be difficult to calculate. See Levya, 716 F.3d at 513-14 (confirming that even after Dukes and Comcast, "the presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3)"). In any event, damages will be very easy to calculate on a classwide basis here. Again, Plaintiffs' theory is not that Uber unlawfully stole (or prevented drivers from obtaining) additional tips that riders would have given to drivers in unknown amounts at their individual discretion. Rather, the theory is that drivers did not receive the [singular] tip that Uber actually "included" in the fare and which tip was unilaterally charged to riders' credit cards in some unspecified amount. Assuming for a moment that the jury finds Uber liable for violating section 351, it will then be tasked with determining what portion of the fares charged actually was the tip. This the jury can likely do from its own common experience, or, perhaps, with the aid of expert testimony. In any event, the jury could assess damages based on common formula or mathematic approach that applies uniformly to the class.
Before considering the final Rule 23(b)(3) requirement, superiority, the Court notes that the class as certified excludes all drivers who "electronically accepted any contract with Uber or one of Uber's subsidiaries that is listed in the Appendix to this Order, unless the driver timely opted-out of that contract's arbitration agreement." The arbitration agreements listed in the Appendix are those that include this Court's mandated opt-out notice and procedures. See O'Connor, 2013 WL 6407583; O'Connor, 2014 WL 1760314. All of these agreements contain class action waivers that purport to prevent the drivers from participating in any class action lawsuit against Uber. See Colman Decl., Exs. K-Q. Instead, the contracts purport to require the drivers to pursue any claims they might have against Uber in individual arbitration. Id.
As this Court has explained at length both in this case and in the related Mohamed litigation, the Court previously exercised its power under Federal Rule of Civil Procedure 23(d) to assert control over class communications in this action in order to "protect the integrity of the class and the administration of justice." O'Connor, 2014 WL 1760314, at *3; see also Mohamed, 2015 WL 3749716, at *4 (describing the Court's prior orders in this litigation vis-á-vis arbitration). Specifically, after Uber issued new contracts in 2013 to putative class members that contained "inconspicuous" arbitration agreements with class action waivers, and which contracts permitted drivers to opt-out of arbitration only by complying with "extremely onerous" and essentially illusory opt-out protocols, this Court required Uber to send corrective notices to its drivers that were intended to insure that (1) all drivers were "given clear notice of the arbitration provision" in Uber's contracts, and (2) provide drivers with a reasonable means of opting out of the arbitration provision. See O'Connor, 2013 WL 6407538, at *7. Uber complied with the Order, and since early 2014, the Court understands that all of Uber's contracts with its drivers have included the Court's approved corrective notice and opt-out procedures. See Colman Decl., Exs. K-Q.
Earlier this year, the Court ruled on a motion to compel arbitration brought by Uber in a related case. See Mohamed, 2015 WL 3749716. In the Court's order, it considered the enforceability of certain of Uber's contracts with its drivers that contained the Court's approved notice and opt-out procedures, described above. Id. The Court noted that "it would be hard to draft a more visually conspicuous opt-out clause even if the Court were to aid in the drafting process, which it actually did." Id. at *17. The Court similarly noted that Uber's revised contracts provide drivers a "reasonable means of opting out" of arbitration. Id. Nevertheless, the Court, applying Gentry v. Super. Ct., 42 Cal.4th 443 (2007), found that there was a modicum of procedural unconscionability under the contracts and therefore concluded that further inquiry into substantive unconscionability was warranted. Because the agreements at issue also contained a substantively unconscionable and non-severable Private Attorneys General Act (PAGA) waiver, the Court ultimately concluded that Uber could not compel the Plaintiffs' claims in Mohamed to arbitration pursuant to the 2014 version of the agreements. See Mohamed, 2015 WL 3479716, at *32-36.
As the California Supreme Court explained in Gentry, even a contract that contains a conspicuous and otherwise meaningful opt-out clause will not be found to be entirely lacking in procedural unconscionability where the agreement (1) does not adequately call attention to specific substantively unconscionable or otherwise unfavorable terms in the agreement, and (2) where the Court has reason to suspect that the party accepting the agreement (i.e., the party who did not draft the agreement) would not have "felt free to opt-out." See Mohamed, 2015 WL 3749716, at *19-20 (summarizing and applying Gentry). The Court found both factors present in Uber's revised contracts, although the Court acknowledged that it is "an extremely close question" whether the Plaintiffs in Mohamed were subject to the "same general economic pressures" not to opt-out of the arbitration agreement "that concerned the Court in Gentry." Id. at *20. Because the Court concluded that the specific Plaintiffs before it were "lower-level laborer[s]" without much economic clout, however, the Court found that the Gentry test was met. Id.
Uber argues persuasively that determining whether any individual class member may benefit from this Court's ruling in Gentry (and thus may participate in this class action) could well require an "individualized inquiry that turns on . . . the economic means of the driver and the circumstances under which he or she accepted the arbitration agreement." Opp. Br. at 39. As noted, the plaintiffs in Mohamed were relatively poor unskilled laborers who depended on Uber for their incomes. See, e.g., Mohamed Docket No. 37-3 (Gillette Decl.) at ¶ 11 (indicating that Uber was Plaintiff's sole source of income). Uber has presented evidence, however, that some reasonably sizeable portion of its drivers may not face the same "general economic pressures" to obtain employment as the plaintiffs in Mohamed. For instance, Christopher Armentrout is an UberX driver with a full-time job who normally drives for Uber "less than five hours a week," typically on weekend evenings. Docket No. 307 at 78. Lee Samantha Faelnar Te similarly drives for UberX only a few hours a week when she is not working at her full-time job for California Credit Union. Docket No. 307 at 397; see also Evangelis Decl., Ex. 13. A credible argument could be made that such drivers would not have felt the same general economic pressure to assent to Uber's arbitration agreement as drivers who appear more economically dependent on Uber for their livelihoods. See, e.g., Docket No. 307 at 6 (Abousleiman Decl.) (drives for UberX ten to twelve hours a day, six days a week, with no outside employment); Docket No. 307 at 269 (Chu Decl.) (drives for UberX "between 2:00 p.m. and 2:00 a.m. six days a week" with no other employment). Any substantial variation on the applicability of Gentry to a particular driver could seriously undercut predominance with respect to the arbitration question.
The Court will not definitely decide the Gentry issue now, as the current class certified herein only includes those drivers who are not bound to one of Uber's more recent contracts, unless the driver timely exercised his opt-out rights. Uber has not argued that individualized issues regarding the validity or applicability of any arbitration clause will predominate with respect to those drivers who are only bound to its earlier pre-2014 contracts. Some of these contracts do not even contain a class action waiver or arbitration provision. See, e.g., Colman Decl., Exs. A-B. And for those earlier contracts that do contain class action waivers and arbitration provisions (i.e., certain 2013 agreements), but that do not contain this Court's corrective notice and opt-out procedure, the Court has concluded that such arbitration provisions are unconscionable and unenforceable regardless of the individual driver's economic circumstances or any other possible differences between signatories. See Mohamed, 2015 WL 3749716, at *21-31. Moreover, the Court has concluded that Uber's likelihood of success on appeal of this Court's determination that the arbitration provisions in these contracts are unenforceable is exceedingly low. See Gillette, 2015 WL 4481706, at *2-7. Simply put, the Court concludes that there are no individualized issues to resolve with respect to whether drivers bound to such earlier agreements may participate in this class action lawsuit, and thus Rule 23(b)(3) permits all drivers who are bound only to Uber's pre-2014 agreements (or those who opted-out of its later agreements listed in the Appendix) to be members of the class.
Finally, in addition to satisfying all four requirements of Rule 23(a) and the predominance requirement of Rule 23(b)(3), the Plaintiffs must also show that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). With respect to the Court's "superiority" analysis, the Federal Rules suggest that the Court should consider:
Fed R. Civ. P. 23(b)(3)(A)-(D).
Uber does not even contest the superiority element, and it appears easily satisfied. First, as discussed above, because common issues predominate with respect to every aspect of the common-law test for employment, it will "be far more efficient to resolve the question of employment status on a class-wide, rather than individual, basis." Dalton, 270 F.R.D. at 565; see also Estrada v. FedEx Ground Package Sys., Inc., 154 Cal.App.4th 1, 14 (2007). Similarly, efficiency counsels in favor of litigating the merits of class members' substantive Tips Claims on a classwide basis, as both liability and damages under section 351 can easily be adjudicated in one proceeding. To the extent that class members have an interest in individually controlling the prosecution of their own action for conversion of gratuities, they are free to opt-out of the class. See id. In any event, there is no evidence that any class members' claims are expected to be so valuable that a significant number of class members would have an interest in separately prosecuting their own actions under section 351. See Breeden, 229 F.R.D. at 630 (holding that even for "those members of the putative class who could potentially submit the largest claims for damages — those who were relatively high wage earners and who are able to substantiate claims of significant [damages] . . . are nonetheless unlikely to present the court with the kinds of multi-million dollar claims frequently at issue in Rule 23 class actions").
Nor is there extensive ongoing litigation pending regarding these claims. The Court is aware of one action pending in Los Angeles Superior Court (Price v. Uber Techs., No. BC554512 (L.A. Superior Court) that involves similar California Labor Code claims to those asserted here. A review of the docket in Price shows that the case has not advanced as far as this litigation. No motion has yet been filed therein. Hence, the parallel nature of the Price action does not counsel in favor of putting off class certification in this case.
Federal Rule of Civil Procedure 23(g) mandates that if this Court certifies a class it "must appoint class counsel." Fed. R. Civ. P. 23(g)(1). In making this appointment, the Court must principally evaluate the adequacy of class counsel to fairly represent the interests of the class, see Fed. R. Civ. P. 23(g)(4), which requires the Court to consider such factors as the work counsel has done to-date in the action, her experience handling class actions and other complex litigation, her knowledge of the applicable law, and the resources counsel will bring to bear in prosecuting the action. See Fed. R. Civ. P. 23(g)(1)(A)(i)-(iv).
Uber hardly attempts to argue that Plaintiffs' current attorney, Ms. Shannon Liss-Riordan, is inadequate to serve as class counsel in this matter. Indeed, Uber does not even argue that Ms. Liss-Riordan is unqualified to represent these Plaintiffs, and any such argument would be without merit. The Court knows Ms. Liss-Riordan to be a capable advocate, and further notes that she is a leading practitioner in the field of employment misclassification both in this District and nationwide.
Nevertheless, Uber professes concern that Ms. Liss-Riordan is inadequate to serve as class counsel here because she is overextended given all of the multitude of cases she is currently prosecuting against Uber and similar firms. The Court shares Uber's concern at least in theory, and advises Ms. Liss-Riordan to focus considerable time and attention on this case now that it has been certified. That said, the Court has not witnessed anything in Ms. Liss-Riordan's performance in this case (or in any of the many others she is currently prosecuting before this Court) to date that would cause the Court to be concerned that Ms. Liss-Riordan and her colleagues will not prosecute this action vigorously and with skill on behalf of the class members. Ms. Liss-Riordan is adequate, will fairly represent the interests of the class members, and is therefore appointed class counsel in this matter.
As noted above, the Court has denied certain of Plaintiffs' requests for class certification. Notably, the Court denied Plaintiffs' request to certify their substantive law claims under Labor Code section 2802 principally because Plaintiffs thus far have failed to satisfy Rule 23(a)'s adequacy requirement to the extent Plaintiffs seek to fulfill the tests of commonality and predominance by using IRS reimbursement rates as the exclusive measure of damages for class members. The Court has also denied Plaintiffs' request to certify additional classes or subclasses of drivers, such as drivers who labored for distinct third-party transportation companies. These denials are without prejudice, however, as Plaintiffs may be capable of making a sufficient showing to warrant certification of certain additional claims and/or subclasses. See Bowerman I, 2014 WL 4676611, at *1, 13 (denying class certification motion without prejudice to renewal within 45 days). If Plaintiffs wish to attempt to make such a showing, they shall file an appropriate supplemental brief within thirty-five (35) days of the date of this order. Uber may file an appropriate response within twenty-one (21) days of the date Plaintiffs serve their supplemental brief, if any. The Court will set further hearing if deemed necessary. Absent further certification of any subclass(es) or claims, the Court will proceed towards trial on the merits based on the class certified herein.
The Court hereby certifies a class action on behalf of the following individuals to pursue their claim that Uber has violated California's Unfair Competition Law by violating Section 351 of the Labor Code:
The parties are ordered to meet-and-confer regarding the contents and logistics of class notice and other relevant procedural details in advance of the next case management conference, which is scheduled for October 22, 2015 at 10:30 a.m. At that conference, the parties shall be prepared to discuss any proposal regarding further class certification.
This order disposes of Docket No. 276.
IT IS SO ORDERED.
