Uber Tip-Skimming Allegations Could Spark National Class Action

curtwoodward writes "Uber has just raised a monster investment round that valued the company at some $3.5 billion. And it looks like some of that cash will have to be earmarked for more legal expenses. The startup, which offers an easy-to-use mobile app for hailing "black car" sedans and other rides, is being sued in federal court over allegations that it's illegally skimming the tips paid to drivers. The lawsuit also claims that Uber is misclassifying its drivers as contractors, rather than employees. The upshot: If the federal judge certifies this as a national class action, Uber could be facing millions of dollars in potential damages. Oh, and the lawyer behind it? She's made a career out of suing companies for exactly these kind of violations."

Comments

How is that an "upshot"?

[hsmith]

So, this woman is very successful at class action suits. So, she has made millions of dollars herself, getting back pennies on the dollar for those who were actually harmed. And Uber is the claimed crook?

Re:How is that an "upshot"?

[Anonymous Coward]

So you would rather bad companies just go completely free than compensate an attorney for his or her work? Class action suits are incredibly difficult to build, organize and execute. They are far more expensive to launch than a single suit and, often, the amount per-plaintiff is too small to justify an individual court case for each. So, instead, a lawyer or law firm foots the expense of a multi-year process in the hopes of returning a verdict that both pays them back plus profits. That seems completely reasonable to me.

For some reason people forget that our civil court is often the ONLY recourse we have against wrongdoing.

Re:How is that an "upshot"?

[rumpledoll]

The point is that a) Uber is stealing tips from the drivers and needs to be punitively punished and the behavior stopped and b) there is so much malfeasance by companies doing this sort of thing that one can make a career out of stopping them from shafting working people. That is the outrage. And yes, the bad actor in this case is Uber and their stealing, not the people trying to set it aright. Dimwit.

Re:How is that an "upshot"?

[Anonymous Coward]

On the one hand, I recognize the importance of holding the companies liable. On the other hand, many of the class action suits are totally ridiculous and almost seem like extortion. I wonder...how often do class action suits just get totally dismissed or lose in court? It seems like every single one I hear about is either a victory for the class action, or (more often) the company settles (usually without admitting guilt). I never hear about the losers. Not sure if that's just because they don't get publicized until they win, or because it rarely fails. If the latter, then it sounds a lot like the RIAA extortion where people (even innocent people) would just pay up the fine because they realized they'd have an uphill (and expensive) battle defending themselves, thus it was better just to give in and pay, which just encouraged more BS extortion lawsuits.

Re:How is that an "upshot"?

[MatthewCCNA]

The only people who "win" law suits are the lawyers; nothing to see here, move along.

Re:How is that an "upshot"?

[hsmith]

It is clearly better for a law firm to make loads of money and toss some scraps to the people actually harmed. Great counter point!

Re:How is that an "upshot"?

[h4rr4r]

The alternative is the company is never forced to pay, so yes that is clearly better.

If you want to see class action lawsuits where the harmed party gets the majority of the settlement then you take your money and fund such cases. You can take the risk of work for no pay, you can wait years for what might be a minimal or no return. Have at it, nothing stopping you.

Until you do that, this is the system we have. The only alternatives would be to allow companies to steal so long as the amounts were small enough or greatly expand the size of our government.

Re:How is that an "upshot"?

[nitehawk214]

It is clearly better for a law firm to make loads of money and toss some scraps to the people actually harmed. Great counter point!

Well what is the alternative? Allow companies to abuse their customers and employees? Because that is exactly what would happen without some kind of balance of power.

is it right that the only winner in this situation are the lawyers? Of course not. But our legal system was created by lawyers so it is no surprise that it benefits lawyers most. The system needs fixed instead of abused. But until then at least there is some incentive for companies to not use abusive behavior.

Re:How is that an "upshot"?

[Idarubicin]

How is that an "upshot"?

<PrincessBride>I do not think it means what you think it means.</PrincessBride>

The "upshot" is simply a result, key outcome, or central point. The term, by itself, does not convey a value judgement by the person using it. Describing something as the upshot does not imply endorsement or an assessment of benefit to any party or to society as a whole; it merely indicates that what follows is the most important part of the story.

So, she has made millions of dollars herself, getting back pennies on the dollar for those who were actually harmed. And Uber is the claimed crook?

Even if we grant your implied premise - that class action suits are intrinsically unethical, or that there might have been a hypothetically-plausible way for the injured parties to recover more money - that doesn't get Uber off the hook. Both lawyer and company can, simultaneously, be (different flavours of) crooks.

Re:How is that an "upshot"?

[rickb928]

Our Government has decreed that health insurance companies must pay out at least 85% of the premiums they collect towards their subscribers' benefits. perhaps we could reform tort law to require class-action attorneys to pay at least 85% of the settlements they negotiate to the class members?

Naw. That's just crazy talk. These lawyers are SERVING us. Their profit motive is above reproach.

Cronyism. The New Left, same as The Old left, just without the encumberances of restraint, and in league with the Old Guard Incumbent Right, who are desperate to save their current jobs.

Re:How is that an "upshot"?

[h4rr4r]

Then there would be no class action lawsuits. You do understand that right?

Health insurance companies are notionally in the business of providing health insurance for profit. Class action lawsuits are not designed to provide restitution to members of the class, just to punish the party being sued and to prevent similar action in the future. This is very basic.

Forget Right or Left, you are in the camp of ignorance.

Re:How is that an "upshot"?

[IP_Troll]

You clearly do not understand how class actions work. 1000 people harmed for $100 is not worth litigating individually. Lump that together into a $100,000 suit and it is worth the time to do it. Plus most class actions are contingency lawyers get like 30%, if the plaintiffs lose they don't have to pay the attorneys.

toss some scraps $70 is better than $0.

Re:How is that an "upshot"?

[h4rr4r]

Yeah, I am just so sick of seeing these same ignorant comments about class action lawsuits.

I am convinced these are the same idiots who propose tort reform as a way to control healthcare costs even though Texas has done it and proven it does not work.

I would be fine with that alternative, if we made it criminal not civil. I want to see their CEO picking up trash on the highway if we go that route.

Re:How is that an "upshot"?

[CastrTroy]

Except that's usually not how it works in practice. If they win, the lawyers get actual real cash money, and the people harmed by the company's actions usually end up getting coupons for use at the business, or something equally stupid. Why would they want to use the business services if they are suing the business. The people the lawyer is defending should have to get paid in the same currency as the lawyer. If the lawyer gets money, so should the plaintiffs, if the plaintiffs get coupons for store services, so should the lawyers.

Re:How is that an "upshot"?

[Dishevel]

So you would rather bad companies just go completely free than compensate an attorney for his or her work?

These lawsuits are not about the people "harmed". They are a deal between two crooks. the crook getting sued gets protection from their bad acts and the crook doing the suit gets cash. Those that were "harmed" get a coupon for future purchases.

Re:How is that an "upshot"?

[Anonymous Coward]

Well duh, that's because the lawyer has done an awful lot of work contacting 1000 people, getting their stories, getting their testimony, collating all this information, and building a case. Building a legal case where you have only 1 or 2 people to talk to to figure out what was going on is hard enough, consider how much effort it needs when you need to contact thousands, and you can't use a for loop.

Add to that that these cases are generally far more risky than normal cases, as they're far easier to pick apart by the defence team, or to slowly chop away groups of people as being ineligible, and you get to a point where you see that actually, it's pretty reasonable for the lawyer to expect a decent return on their risk.

The bottom line though is that if you think that you could do this cheaper, and pass on more to the clients, and less to yourself, then you're welcome to do that. The fact that there are [b]lots[/b] of lawyers out there, and that it's a highly competitive market, yet none of them think that they can actually do that should tell you something about the situation.

Hahaha, I wish you were joking, seriously, I've been a member of maybe 20-30 different classes over the last 30 years or so and not once have I or any other member of a class that I've known ever been contacted by a lawyer for testimony. There's a notification letter and an award letter, that's it.

Re:How is that an "upshot"?

[bluefoxlucid]

I'm only seeing a one-sided story with no real story in here. And what I'm seeing sounds like huge lawyer bullshit and media bait.

Try this:

This new lawsuit mirrors the central claim in the Boston case, in which cab driver David Lavitman said Uber was effectively skimming half his 20 percent tip by taking a $1 booking fee and 10 percent of the fare. Liss-Riordan is also one of the attorneys in that case.

"Effectively"? It sounds like a $1 booking fee (operational fee per booking for the service provider) plus a percent of total service provided (i.e. miles). This means you get billed for using the service to get a cab ($1), plus they get a cut of the total transit mileage (10% fare). That seems fair and normal for this sort of business--I mean hell, pizza delivery services charge a fucking delivery fee that doesn't go to the driver as a tip, because they have to idle and coordinate drivers while paying them a wage.

It also sounds like the fare belongs to the driver, so effectively the drivers are basically contractors. Or clients? I would have modeled this as that the drivers join to find passengers to get money from, and the passengers join to hail cabs.

“In some situations, they charge 20 percent gratuity to the customer and they only give 10 percent of that to the driver,” Liss-Riordan said. “In other instances, they just say the gratuity is included, but they don’t actually give the drivers a gratuity. So they’re basically lying to the customers.”

This sounds like bullshit. "Rather than having a single, standard system that would stand up to legal scrutiny and that may have explainable flaws in case of legal disputes, the company is going through the effort of actively doing multiple dumbshit things that provide greater and more expensive operational overhead and an obvious case for legal malice." ... yeah, no. It sounds more like "I only got half my tip wah wah wah!" "I never gots MAH tips!" hear-say being parroted as fact, before any real discovery. Given the timing, I would bet money discovery hasn't occurred and they're just making shit up.

But let's attack the big evil corporation. Start-ups are the new 1%!

Re:How is that an "upshot"?

[Cabriel]

"Effectively"? It sounds like a $1 booking fee (operational fee per booking for the service provider) plus a percent of total service provided (i.e. miles). This means you get billed for using the service to get a cab ($1), plus they get a cut of the total transit mileage (10% fare). That seems fair and normal for this sort of business--I mean hell, pizza delivery services charge a fucking delivery fee that doesn't go to the driver as a tip, because they have to idle and coordinate drivers while paying them a wage.

Pizza delivery places don't take the delivery charge out of the tip. That's in addition to the tip. If Uber added the "10% of fare" and "$1 booking fee" directly to the pre-tip amount owed by the passenger, then that would be fair. Making the cab driver pay for the privilidge of having the service target his company is inappropriate.

Re:How is that an "upshot"?

[Hatta]

perhaps we could reform tort law to require class-action attorneys to pay at least 85% of the settlements they negotiate to the class members?

Would that lead to fewer class action suits? It seems likely, if you reduce the incentive for lawyers to make those suits. If it does lead to fewer class action suits, would that reduce their deterrence of bad behavior by companies? If it does reduce the deterrence effect, could that cost consumers overall more than they lose to class action lawyers today?

I'm not disagreeing with you, it's a good idea. But good ideas sometimes have unintended consequences. It's definitely worth an experiment, but the result could go either way.

Re:How is that an "upshot"?

[Jawnn]

So, this woman is very successful at class action suits. So, she has made millions of dollars herself, getting back pennies on the dollar for those who were actually harmed. And Uber is the claimed crook?

Yes, because Uber actually is (it appears) a crook. Your mistake is in assuming that class action lawsuits are the proper vehicle for individuals to recover damages. They are not. They are, however, a marvelously effective way for a group of those individuals, who would otherwise be unable to mount a serious legal challenge, to collectively hit back in a meaningful (expensive to the respondent) way. In other words, the successful CA lawsuit against Uber will make them treat their employees fairly, instead of cheating them out of a large portion of the money they are due.

Re:How is that an "upshot"?

[jd.schmidt]

You forgot to include the New Right and Main Stream Libertarians, Capitalist when it helps them and Socialist when it helps them.

The truth is if you read the post, pretty much everyone is asking if there is a better way. So far I have not seen a single counter suggestion, besides maybe the implied eliminate class action lawsuits OR expand government.

Perhaps simplifying the legal process might empower individuals to take up their own cases more often, not that that would help in the case of class action.

Re:How is that an "upshot"?

[sjames]

The award to the actual members of the class should at least be non-insulting, and the lawyers should consider that when settling. A million to the lawyers and a coupon for 10% off of the next Shittee brand product for class members who clearly will never buy a Shittee brand product again is insulting. Even sending 1 dollar to each class member through the mail would be less insulting.

Re:How is that an "upshot"?

[AthanasiusKircher]

Class action lawsuits are not designed to provide restitution to members of the class, just to punish the party being sued and to prevent similar action in the future. This is very basic.

This is absolute nonsense. One of the primary aims of class action suits is to provide members of a class with a means to recover relatively small sums. Since the cost of any type of lawyer -- let alone depositions, sorting through evidence and paperwork, etc. -- would be prohibitively expensive even in small claims court, no one would ever try to bring a suit against a big corporation with a legal team unless they were going to win many thousands of dollars.

If the average person was only wronged by losing $10 or $50 or even $500, the cost of litigation is often prohibitively high. Class action lawsuits are certainly a means allowing such people to band together and use a collective legal team to recover damages.

Wikipedia is not the best resource for legal advice, but it gets it right here under "advantages" for class actions:

[A] class action may overcome "the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (quoting Mace v. Van Ru Credit Corp., 109 F.3d 388, 344 (7th Cir. 1997)). "A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor." Amchem Prods., Inc., 521 U.S. at 617 (quoting Mace, 109 F.3d at 344). In other words, a class action ensures that a defendant who engages in widespread harm - but does so minimally against each individual plaintiff - must compensate those individuals for their injuries. For example, thousands of shareholders of a public company may have losses too small to justify separate lawsuits, but a class action can be brought efficiently on behalf of all shareholders. Perhaps even more important than compensation is that class treatment of claims may be the only way to impose the costs of wrongdoing on the wrongdoer, thus deterring future wrongdoing.

So, yes, at the end of this quotation, you see the issue that punishing the offender is important, but that doesn't mean that recovery of damages isn't actually a major goal of class action suits... as you claim.

Forget Right or Left, you are in the camp of ignorance.

Next time try knowing what you're talking about before you start calling other people names.

Re:How is that an "upshot"?

[MindStalker]

But how is Uber a "bad company". It sounds like they are completely sticking to their clearly laid out payment system. Shes simply arguing that their payment system is bad for 1) Taking a 10% cut of everything including tips. 2) Charging a $1 booking fee, 3) Not reimbursing for gas/maintenance.
All the drivers understand the payment system and agree to it, if it wasn't a fair deal, people wouldn't be doing it. These people certainly aren't "employees" by any stretch of the imagination.

Re:How is that an "upshot"?

[retchdog]

Strictly speaking, `upshot' refers only to the ``final or eventual outcome or conclusion of a discussion, action, or series of events."

It does not mean that the outcome is positive; that's just an erroneous modern association with other `up'-words like `uplifting' and so on.

There is, for example, in the translation of Rabelais' Gargantua and Pantagruel, an extended amoral dialogue about the `upshot' of raping a nun.

Self Driving

[stewsters]

Good thing they bought all those Google self driving cars in that article a few days back! You don't need to pay the drivers or skim their tips. Good thing that actually happened.

Re:Self Driving

[tbuddy]

That story was a hoax and a sort of late April Fool's joke. The article was even dated a decade into the future.

Tip in cash

[unixcorn]

I have used Uber and find it to be a convenient service. I recognize the additional fees that go on my card and also tip the driver in cash. From what I read in the article, it sure looks like some sour grapes from the drivers. They agreed to the program and are now complaining that they aren't making enough. Seems like they should find another pimp.

Re:Tip in cash

[Anonymous Coward]

The contract thing is likely not going to fly, if the drivers own their own equipment and set their own hours, I'm pretty sure they are contractors.

Skimming tips though? If that's true then Uber should be pounded into the ground, balls first. If there's a line on the receipt that says tip and it's not a tip, then it's straight up fraud, 100%. None of this "just tip cash" bullshit, why should riders be inconvenienced because of a company lying to take their money?

We need more unions / workers rights

[Joe_Dragon]

Way to many companies are misclassifying there works as contractors or pushing them off to subs and yet controlling them like employees. So they can get it both ways of the control of employees with out the costs / responsibility's of having employees.

Re:We need more unions / workers rights

[Nidi62]

Way to many companies are misclassifying there works as contractors or pushing them off to subs and yet controlling them like employees. So they can get it both ways of the control of employees with out the costs / responsibility's of having employees.

You think unions actually care about the employees, or even care about fairness? I work at a company that is partially union and a few years ago we had a union come in to try and unionize the job that I do. They employed every dirty trick in the book, from harassing people at home, getting the NLRB to change the rules of the election (from counting yes votes as a percentage of all eligible employees to just out of the total votes cast), and, worst of all (and this makes my previous point all the more telling) they actually tried to sue the company for tampering with the election because the company publicized to the employees when the election was. Think about that. The union actually wanted as few people as possible (ie only their supporters) to vote. I would much rather trust the CEO of a company who only cares about their company than the union boss who only cares about his union. At least companies are honest when they screw over their employees. Unions just smile to your face while they take the money out of your wallet.

Re:We need more unions / workers rights

[IP_Troll]

I don't see how forcing the taxi drivers to pay union dues will increase their paychecks.

Contract worker versus employee has nothing to do with the workers, it has to do with the company trying to avoid employment taxes. If you are a contract worker, the employer does not have to pay employment tax on you, and the employer cannot set your hours worked in a day.

If you are a contract employee and your employer tries to control your hours, quietly make a phone call to the state/ federal tax authorities.

OH but if they find out they will fire me. Then you have a whistle blower suit against the company.

Re:We need more unions / workers rights

[Dogtanian]

Yet, since we have a liberal, union happy president then such laws will never happen.

I assume you're using "liberal" in the US sense, i.e. to mean "left-wing"...

The same thing can be accomplished with labor laws, and not have to resort to adding the inefficiency of a union. The last thing we need is another entity with an outstretched hand taking for employees.

...which would make it ironic that you're advocating the government-created-and-enforced solution and criticising the "free market" one of one group of self-organised-people (i.e. unions) competing for their interests against another group of self-organised people (i.e. companies).

Re:We need more unions / workers rights

[CanHasDIY]

Solving a problem by introducing more problems is never a good plan.

Naysaying without offering any alternative is pretty much always a douchey thing to do.

Yea, yea, we get it, you've been instructed to hate unions. Wake me when you have something constructive to say.

Complexity of laws

[intermodal]

The complexity of laws pretty much assured that Uber would get in trouble at some point over something. The way they have to operate to avoid being considered taxicabs for legal purposes pretty much ensured that any way they profited would be an invitation to one suit or another.

Doesn't Uber discourage tips anyway?

[langelgjm]

I've used it twice. I thought they discouraged tips, suggesting the fee you paid was inclusive of everything? That's part of the appeal. A significant number of cabs in DC don't accept credit cards, and not long ago, it used to be a free-for-all catching cabs at Union Station after midnight, with cab drivers forcing riders to share cabs, refusing riders based on destination, etc. (all of which is illegal). Uber was great for that - call a black car, they pick you up, no waiting, no cash... home in 15 minutes. Yes, it was more expensive than a cab, but the service made it worthwhile.

Re:Doesn't Uber discourage tips anyway?

[langelgjm]

Well, it wouldn't surprise me. DC's cab industry is incredibly corrupt. I rarely take cabs anymore, but I recall there being an issue with the way the city set rates - it made it virtually impossible to know how much cash you might need (maybe it was the zone system, which they no longer use). Combine that with the difficulty of finding a cab in many areas, and the tendency of some drivers to refuse to take you to certain destinations, if all you had was a credit card, or not enough cash (or possibly not enough cash, given that you didn't really know how much the fare might be), it created enough of an inconvenience that some people (myself included) were willing to pay a premium for Uber simply to not have to deal with cash, among other things.

Re:Doesn't Uber discourage tips anyway?

[rjstanford]

Requiring a minimum standard of service (that might, for example, include having a card reader) is a reasonable trade for the right to provide a lucrative yet limited-availability service, since nobody can just "add one" to the number of cabs in the city to compete directly.

Re:Doesn't Uber discourage tips anyway?

[infinitelink]

"not long ago, it used to be a free-for-all catching cabs at Union Station after midnight, with cab drivers forcing riders to share cabs, refusing riders based on destination, etc. (all of which is illegal)."

And it shouldn't be. That government in the US treats cabbies and their operations like government property, Public Utilities, etc. (all bullshit) puts these companies (and their drivers) into binds; everywhere this is done service is artificially degraded, segregated between areas (doesn't matter if there is demand to be met--such and such company bribed us off before you did)--e.g. a cabbie drops someone off 20 miles from a location and then can't pick someone up a mile away but has to drive like 15 back into his own zone: cabbies themselves have to work for a state-approved company so get raped in the *** for fees on a cab and dictated to and oh, they're also treated like contractors when really they're controlled employees (and the States and feds involved...know and have never done anything about it: to do so would destroy their licensing/control schemes).

I say let them force sharing: if you don't like it, pay more. That's how a market of people voluntarily doing work and offering services and goods is supposed to work. Frankly, it could make it cheaper: if not, people would go elsewhere (like Uber) rather than crying "it's not what I want, I should go to my legislator to have it made illegal", right? I for one...wouldn't mind splitting fare in a cab myself.

Re:Doesn't Uber discourage tips anyway?

[langelgjm]

if the standards don't meet expectations, just don't use them, as it goes WITH ALMOST ANY OTHER BUSINESS.

But taxicabs aren't like other business. With any other business, you usually have a range of price points to choose from. With taxicabs, fares are set.

My point is that if the government is going to set the price, then it also makes sense for the government to set standards for the product. If you don't want such standards, fine, but you should also do away with the set pricing.

Well ...

[gstoddart]

The lawsuit also claims that Uber is misclassifying its drivers as contractors, rather than employees.

Well, are they contractors? You should now your own employment status.

Depending on what exactly the relationship between the drivers and the company will define a lot. If they're just a dispatcher for people who have signed up to be told they can pick someone up ... you may well be a contractor.

I'm fairly sure cab drivers aren't generally considered employees, so unless you've been hired by these people, and they're doing your payroll deductions and the like, why would this be different?

Skimming tips is another issue, and could indicate all kinds of douchy-ness, but whether or not you're a contractor will depend entirely on what kind of relationship you have with them.

Scam lawsuit

[TWiTfan]

Uber has a *lot* of enemies in the established cab and limo industry. Don't take any lawsuit against them on face value. You can bet that the REAL impetus behind this lawsuit has nothing to do with tips or contracting.

Re:Scam lawsuit

[dkleinsc]

Ok, so let's say this is some plot by traditional cab and limo companies. So what? If Uber is able to offer cheaper prices than the established cab and limo industry because it is stealing from its employees, that's about as fair competition as a legitimate used car business competing with a car theft ring. If the complaint is true, that means a traditional limo company pays drivers $8 per hour plus tips plus half the FICA tax, and Uber is out there paying people at what amounts to $4 per hour as an "independent contractor" plus no tips and none of the taxes. And those "independent contractors" are in fact the victims of that policy and should be the plaintiffs in the suit.

That's why we have court systems with class-action lawsuits and discovery and public records and a judge and possibly a jury to sort this thing out.

I Still Don't Understand...

[Anonymous Coward]

I still don't understand how/why the taxi business is so thoroughly convoluted and corrupt, at all levels.

Re:Startup?

[RazzleFrog]

Startup isn't a measure of dollars but time. Although one could argue that after 4 years it isn't really a startup based on time either.

Re:How is Uber different from Gypsy cabs?

[rjstanford]

They're registered as private "limos" (size unspecified in regulation) that are not unregulated like gypsy cabs but rather "differently regulated". For example, you can't hail a black car on the street. Uber just made it even easier to reserve one with very little notice than it is to hail a cab - that's the disruption they brought to the market.

Kneel and get my permission

[Impy the Impiuos Imp]

Licensing, if it is to exist at all in a free societ, should be about competence and not restricting entry to a profession. Otherwise it becomes the age old tool of corruption where you know people and give kickbacks to get a license.

i.e. kleptocracy business-as-usual.