Uber Technologies Inc. was barred from imposing a new contract on drivers who are suing the company to be treated like employees after a federal judge said the reworded agreement is confusing.
U.S. District Judge Edward Chen in San Francisco on Thursday also ordered Uber to stop communicating with drivers covered by the class-action lawsuit without consulting a lawyer for the drivers or getting the court’s consent.
The rebuke to the world’s most valuable startup came after a lawyer for the drivers accused Uber of going behind her back to circulate a reworded work agreement Dec. 11 that she said was meant to trick her clients into relinquishing their right to join the class action.
Chen concluded the new contract is “likely, frankly, to engender confusion.”
“I’m very concerned about what has happened,” he told lawyers in court.
“This court had ruled that provisions were unlawful, unconscionable and unenforceable,” Theodore Boutrous, the attorney, said in court. “The agreement that was sent out addresses the things that this court was troubled by, it fixes those things.”
Uber issued the new agreement two days after Chen vastly expanded the case, seeking to classify California drivers as employees rather than independent contractors, to include more than 100,000 people. A provision of the new agreement requires drivers to resolve any conflicts with Uber in private arbitration instead of court.
While the contract gives drivers 30 days to opt out of the provision, it also prohibits those who don’t “from participating in or recovering relief under any current or future” class action.
Shannon Liss-Riordan, the drivers’ lawyer, said in a court filing that the agreement is aimed at undercutting the tens of thousands of drivers eligible to join the suit. Hundreds of drivers have phoned her office expressing “confusion and dismay about the new agreement” because they don’t understand if they have to opt out of the new arbitration provision to join the lawsuit, according to the filing.
Uber said it told Chen at a Dec. 10 hearing in a different, related case that it would issue the agreements containing new arbitration agreements. The judge acknowledged “why the planned rollout made sense,” the company said.
The company said on the day it issued the reworded contract that it wouldn’t apply the new arbitration provisions to any drivers covered by the class action. The new agreement is intended to be “more driver-friendly,” the company said in a court filing.
Chen ruled Dec. 9 that drivers in the class action can seek expense reimbursement, including as much as 57 1/2 cents for every mile driven, in addition to their claims for tips that were already part of the case. A trial is scheduled for June. A victory for the drivers threatens to upend the ride share company’s business model and cut into its more than $60 billion valuation.
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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