Uber Technologies Inc. won a legal victory on Tuesday as a federal appeals court said drivers seeking to be classified as employees rather than independent contractors must arbitrate their claims individually, and not pursue class-action lawsuits.
In a 3-0 decision, the 9th U.S. Circuit Court of Appeals in San Francisco reversed a lower court judge's denial of Uber's motion to compel arbitration in three lawsuits.
It also overturned the class certification in one of the lawsuits of thousands of California drivers who had driven for the San Francisco-based ride-hailing company since August 2009.
Drivers had complained that Uber misclassified them as independent contractors to avoid having to reimburse them for gasoline, vehicle maintenance and other expenses.
Some also accused Uber of wrongly refusing to let them keep all tips from passengers.
The decertified class action included both types of claims.
Class actions let people sue as a group, and potentially obtain greater recoveries than if forced to sue individually, which might prove prohibitively expensive.
Uber's defense got a boost after the U.S. Supreme Court, in Epic Systems Corp v Lewis, ruled 5-4 in May that companies could compel workers to waive their right to class actions and instead pursue arbitration for various workplace disputes.
In Tuesday's decision, Circuit Judge Richard Clifton said arbitration was necessary in light of the Epic ruling, as well a 9th Circuit ruling from 2016 in another case against Uber.
Shannon Liss-Riordan, a lawyer for the drivers, said the overturning of the class action was expected.
She may ask an 11-judge appeals court panel to revisit the case, but said thousands of drivers are pursuing individual arbitrations in the meantime.
"If Uber wants to resolve these disputes one by one, we are ready to do that -- one by one," she said.
A lawyer for Uber, Theodore Boutrous, said: "We are very pleased with the Ninth Circuit's order reversing class certification."
The decision applies in nine Western U.S. states, but could be cited by courts elsewhere.
Uber has faced dozens of lawsuits claiming that its drivers are employees entitled to minimum wage, overtime and other benefits not afforded to contractors.
Chief Executive Dara Khosrowshahi is preparing to take Uber public next year, and the company's ability to retain drivers is critical to its growth prospects.
In his year at the helm, Khosrowshahi has tried to improve Uber's image, including by addressing federal criminal and civil probes into its business practices and stamping out its reputation as tolerant of chauvinism.
The cases in the 9th U.S. Circuit Court of Appeals include O'Connor et al v Uber Technologies Inc, No. 14-16078; Yucesoy v Uber Technologies Inc, No. 15-17422; and Del Rio et al v Uber Technologies Inc et al, No. 15-17475.
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