Uber Technologies Inc.’s effort to stifle a legal challenge to its business model was struck down on Tuesday by a federal judge, which granted class-action status to a lawsuit claiming the car-hailing service treats its drivers like employees without providing the necessary benefits.
A 68-page court ruling from U.S. District Judge Edward Chen in San Francisco ordered that the suit, brought on behalf of three drivers, applies to all drivers in California who didn’t waive their right to the class-action arbitration.
The ruling sets the stage for a high-profile legal battle which could have sweeping implications for Uber’s business model and set a precedent for dozens of startups whose future fortunes rely on independent contractors to deliver food, run errands and clean houses.
Millions of Americans are opting for more flexible work arrangements that let them set their own schedules and hold multiple part-time occupations.
Uber has raised billions of dollars from investors at a valuation that has surged to $51 billion on the premise that it operates a technology platform connecting drivers and passengers, rather than a taxi service which owns cars and employs drivers. If the class-action suit succeeds, it could force Uber to pay drivers for health insurance, workers’ compensation and work expenses such as tolls, fuel and car repairs.