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Everything to Know About the Uber Class Action Lawsuit

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London Taxi Cabs As Uber Technologies Inc. Blitz Leads To Drop in Black Cab Recruits
A user scans for an available vehicle using the Uber Technologies Inc.'s app on an Apple Inc. iPhone 6 smartphone in this arranged photograph in London, U.K., on Thursday, May 14, 2015.Bloomberg—Bloomberg via Getty Images
By Laura Lorenzetti

A California judge on Tuesday granted class-action status to a employee status lawsuit filed against ride-hailing company Uber. The 68-page court ruling sets the stage for a fierce legal battle that could upend Uber’s business model.

Here’s what you need to know.

What does the lawsuit allege?

The lawsuit claims Uber has misclassified its employees as contract workers. It alleges that Uber treats drivers like employees but without providing the requisite benefits, like health insurance and expense reimbursements.

Who brought the case?

It was originally brought on behalf of three Uber drivers, but a California judge ruled that it applies to all drivers in the state, thus making the legal challenge a class-action lawsuit.

However, any drivers who waived their right to class-action arbitration cannot take part in the suit, which means only a minority of the 160,000 drivers in California can participate. Most drivers waived their right to class-action lawsuits after Uber updated its contract process last year. In fact, one of the three drivers who originally brought the suit cannot participate for this reason.

See Uber Protests From Around the World

French Taxi drivers burn tires as they protest in the southern city of Marseille on June 25, 2015 as they demonstrate against UberPOP, a popular taxi app that is facing fierce opposition from traditional cabs.
French Taxi drivers burn tires as they protest in the southern city of Marseille on June 25, 2015 as they demonstrate against UberPOP, a popular taxi app that is facing fierce opposition from traditional cabs. Anne-Christine Poujoulat—AFP/Getty Images
French taxi drivers protest Uber
Police officers in riot gear attempt to flip a car back onto it's wheels at Porte Maillot on June 25, 2015 in Paris. Protesters blocked roads to airports and train stations, overturning cars and setting tires on fire.Guillaume de Senneville—Demotix/Corbis
Hundreds of taxi drivers gather next to the Olympia Stadium to protest ride-sharing apps on June 11, 2014 in Berlin.
Hundreds of taxi drivers gather next to the Olympia Stadium to protest ride-sharing apps on June 11, 2014 in Berlin.Sean Gallup—Getty Images
A demonstrator kicks a car, suspected of being a private taxi during a 24 hour taxi strike and protest in Madrid on June 11, 2014.
A demonstrator kicks a car, suspected of being a private taxi during a 24 hour taxi strike and protest in Madrid on June 11, 2014. Paul White—AP
A taxi driver listens to speeches by his colleagues, during an Europe-wide protest of licensed taxi drivers against taxi hailing apps that are feared to flush unregulated private drivers into the market, in front of the Olympic stadium in Berlin on June 11, 2014.
A taxi driver listens to speeches by his colleagues, during an Europe-wide protest of licensed taxi drivers against taxi hailing apps that are feared to flush unregulated private drivers into the market, in front of the Olympic stadium in Berlin on June 11, 2014. Thomas Peter—Reuters
Taxi drivers hold a banner during a protest in Barcelona on June 11, 2014.
Taxi drivers hold a banner during a protest in Barcelona on June 11, 2014. Josep Lago—AFP/Getty Images
London taxi's line up on The Mall during a protest against a new smart phone app, 'Uber' on June 11, 2014 in London.
London taxi's line up on The Mall during a protest against a new smart phone app, 'Uber' on June 11, 2014 in London.Dan Kitwood—Getty Images
Taxi drivers park their cars and honk the horn in protest on Pennsylvania Avenue, bringing street traffic to a stop as they demand an end to ride sharing services such as Uber X and Lyft on June 25, 2014, in Washington.
Taxi drivers park their cars and honk the horn in protest on Pennsylvania Avenue, bringing street traffic to a stop as they demand an end to ride sharing services such as Uber X and Lyft on June 25, 2014, in Washington.PAUL J. RICHARDS—AFP/Getty Images
An Italian taxi driver distributes leaflets reading "Don't take an illegal taxi, take a white regular taxi" during a protest on June 11, 2014 in Rome.
An Italian taxi driver distributes leaflets reading "Don't take an illegal taxi, take a white regular taxi" during a protest on June 11, 2014 in Rome.ANDREAS SOLARO—AFP/Getty Images
Taxis drivers block a highway outside Paris, near Roissy on June 11, 2014, as they take part in a demonstration to protest the growing number of minicabs, known in France as Voitures de Tourisme avec Chauffeurs (VTC).
Taxis drivers block a highway outside Paris, near Roissy on June 11, 2014, as they take part in a demonstration to protest the growing number of minicabs, known in France as Voitures de Tourisme avec Chauffeurs (VTC). Fred Dufour—AFP/Getty Images

What does this mean for Uber?

It sets up a high-profile legal battle and could potentially require Uber to pay out a much larger settlement to drivers. It also puts Uber’s business model under pressure.

Uber has continually said that it’s a technology platform connecting drivers to passengers and not a taxi service that hires drivers directly. If the company loses the class-action suit, Uber may have to compensate its drivers like common employees, which would mean new costs like health insurance, workers’ compensation and reimbursing expenses such as tolls, fuel and car repairs.

What happens next?

Uber plans to appeal the California judge’s decision to allow class-action status. “We’ll most likely appeal the decision as partners use Uber on their own terms, and there really is no typical driver–the key question at issue,” an Uber spokesperson told Fortune.

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