Business Policy Changes Can Create Legal Problems
Change is at the heart of any good business. Staying stagnant will often lead to your business being left behind, while change is often the catalyst for growth and profits.
But change must be implemented correctly. Often, good ideas can lead to trouble when the legalities of the changes aren’t fully thought through. Such is the case with ride sharing monolith Uber, which faces a class action lawsuit over changes to its policies.
Policy Change Leads to Class Action Suit
For a long time, Uber’s policy was to pay their drivers 80% of whatever the ride fare was, and Uber kept 20%. Uber drivers signed contracts with those figures agreement in it.
In an apparent effort to grow–or at least, for some business reason–Uber decided to change how it charges its riders. Instead of just paying at the end of the trip, like a rider would in a taxi and how it had been done for years, riders would now pay at least a part of the fare up front. Because the fare was largely being paid before the actual ride, it was based on an estimate of how long or far the trip was estimated to be.
But estimates aren’t exact, and sometimes the actual ride was shorter than estimated. The lawsuit alleges that Uber would keep its percentage out of the larger “estimate,” but drivers were paid 80% of the actual, sometimes shorter and thus cheaper than estimated trip.
According to the drivers in the lawsuit, they should have received 80% of what was actually paid to Uber. By paying them 80% of the trip, and not what was actually paid, the drivers allege they were effectually paid less than 80%, the contractual payment rate.
Uber Admits That It Was Going to Change Its Contracts
For its part, Uber says that it planned to send out updated agreements to its drivers, and to start reporting the fill price every rider pays to the drivers. But apparently, those were just plans, and were never actually implemented.
All of this comes after Uber admitted that it underpaid drivers in New York, when it was taking its 20% on the full amount of each ride fare, even though a percentage of each fare was actually for taxes. Uber did admit that it owed money to its drivers in that case, and has since tried to settle the case.
Changing Policy Means Reviewing Legalities
Uber’s alleged fault is one that many businesses make–implementing business change or policy, without thinking through the legal ramifications of such policies. Or, when businesses do appreciate the legal effects they are slow to actually get legal counsel to review the changes or draft or amend the documents needed to stay in legal compliance.
Contracts and agreements are static, and not great instruments of change. As a business changes, the terms of contracts often stay the same. Lawsuits can result when companies don’t keep the terms and conditions of contracts up to date with how they are doing business.
Businesses also need to realize that every policy change should be reviewed from a number of angles–not just contractual, but also in terms of government compliance, employment law, tax law, liability issues or immigration issues.
Make sure your business agreements and policies and procedures are reviewed by legal counsel. Contact Tampa business and commercial law attorney David Toback to review your business agreements.