(Bloomberg) — Uber Technologies Inc. will have to defend a group lawsuit brought by drivers seeking the pay and benefits of employees.
The ruling may slow Uber and cut into its $50 billion valuation. It could affect drivers around the country, even though the San Francisco case is limited to 160,000 drivers in California.
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Changing drivers' status would entitle them to unemployment and workers' compensation as well as the right to unionize.
Tuesday's federal court ruling means Uber's California drivers can, as a group, press the central claim of the case, that they can seek reimbursement for mileage and tips. Other courts in the U.S. will likely look to Chen's reasoning in evaluating other such challenges, experts said.
The ruling is "a very big deal," said Beth A. Ross, an employment lawyer who won a similar case against FedEx Corp. "The question in this case is whether Uber's business model is lawful or unlawful. If that question gets to be decided on a class-wide basis, that's the whole ball game," Ross said before the decision was issued.
In the FedEx case brought by its drivers, a class action, the company agreed to a $228 million settlement that is being considered by Chen.
Uber's financial exposure as a result of Chen's ruling is significant because the mileage and tip claims "are worth a fortune," Ross said. "The dollars add up really, really fast," she said, saying the 2,000 drivers in her FedEx case pale in comparison to 160,000 in Uber's.
The case is O'Connor v. Uber Technologies Inc., 13- cv-03826, U.S. District Court, Northern District of California (San Francisco).
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