Uber is in legal hot water -- again

The darling of the ride-sharing startup scene is in trouble again.

Uber, which has been hit with fines, lawsuits and cease-and-desist orders since it rolled out its hire-a-car app in 2009, is now facing allegations that the company is cheating drivers out of their tips.

Two Uber drivers have opened a class-action lawsuit against the San Francisco tech company, claiming it pockets much of the 20% gratuity that is included for the driver in the fare.

Uber’s website tells customers there is “no need to tip” for most rides. But when taking a yellow cab via the Uber app — instead of one of Uber’s black cars —  20% of the metered fare will be automatically added and paid to the driver as a gratuity, according to the website.

The lawsuit, brought by Douglas O’Connor and Thomas Colopy, states that Uber drivers “do not receive the total proceeds of any such gratuity” and that “instead, Uber retains a portion of the gratuity for itself.”

The lawsuit goes on: “Furthermore, based on Uber’s communication to drivers that gratuity is included in the price of the service and so they do not need to tip, few if any customers leave tips for drivers.” Thus, Uber drivers don’t get the tips they would if they were working for a cab company, according to the lawsuit, filed Aug. 16 in the U.S. District Court in San Francisco.

Uber has said its drivers get more business and make better wages than if driving for a cab fleet alone. Andrew Noyes, an Uber spokesman, told BloombergBusinessweek that lawsuit is without merit: “Frivolous lawsuits like this cost valuable time, money, and resources that are better spent making cities more accessible, opening up more possibilities for riders, and providing more business for drivers.”

The allegations are particularly ill-timed, as Uber and its fellow ride-sharing services prepare for the California Public Utilities Commission vote on Sept. 5 to approve a new transportation category and regulations that would grant state licenses to companies like Uber, Sidecar and Lyft and allow their cars to stay on the roads. The regulations, if approved, would pull hire-a-car startups and ride-sharing companies out of their protracted regulatory limbo and pave the way for their expansion into other states and countries.

But opposition from some taxi companies is still fierce, and claims that Uber is cheating drivers likely will only embolden cab drivers and their allies, who have pressured the PUC to impose on ride-sharing companies the same regulations, medallion system and fees that are applied to cab fleets.

And despite its successful expansion into some overseas cities, Uber is also making enemies in the highly sought Parisian market. Responding to pressure from regular taxi drivers, French government officials are considering new rules that would require any car booked through the Uber app to wait at least 15 minutes before picking up the passenger, as BloombergBusinessweek recently reported.

The PUC meeting is scheduled for 9:30 a.m. Sept. 5 at 505 Van Ness Ave. in San Francisco.

The allegations come on the heels of last week’s news of Google’s $258 million investment into Uber, which is expected to help the app “expand into new markets, accelerate customer and driver acquisition, and fight off protectionist, anti-competitive effort,” Travis Kalanick, Uber’s chief executive, wrote in a blog post.

Google Ventures already has invested in ride-sharing startup SideCar.

Google’s mega investment may finally force Uber to shed it image as a scrappy startup and catapult it into a new class of Silicon Valley tech powerhouses. PUC officials have commented on concerns that Uber and other ride-sharing services only serve certain demographics — professionals and smartphone owners, often of a higher income. Part of the proposed regulations require ride-sharing services to prove they are serving a diverse customer base, including disable riders.

 Uber logo from theverge.com

Heather Somerville Heather Somerville (225 Posts)

Heather Somerville is a business reporter covering venture capital and startups for the Bay Area News Group.