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The six looming legal threats that could sink Uber

  • Uber has finished its closely followed review of company culture.
  • But while that may be over, legal battles over harassment, driver classification, 'greyballing' and more are still ongoing, lawyers say.
Taxi drivers, union members and civic groups rally on the steps of City Hall to support a City Council move to limit the number of Uber drivers and other for-hire car companies, July 20, 2015 in New York City.
Getty Images
Taxi drivers, union members and civic groups rally on the steps of City Hall to support a City Council move to limit the number of Uber drivers and other for-hire car companies, July 20, 2015 in New York City.

Uber board members and executives say the company is starting fresh — building Uber 2.0.

But while the closure of internal workplace culture probes could mark a new beginning for some employees, Uber is still haunted by plenty of its old ways, especially on the legal front. With several lawsuits playing out in courts across the country, lawyers told CNBC the company still has plenty of work ahead of it.

Here are six of the biggest legal threats ahead for the company, according to lawyers.

1. Emboldened claimants of discrimination, sexual harassment, and retaliation 

Perhaps most salient is the recent release of Uber's workplace culture investigations, one of which resulted in the dismissal of at least 20 employees. Another probe resulted in a 13-page list of recommendations for overhauling the company.

The company investigated 215 claims: 54 of discrimination, 47 of sexual harassment, 45 of unprofessional behavior, 33 of bullying, 19 of other harassment, 13 of retaliation, 3 of physical security and 1 wrongful termination claim.

While Uber has taken steps to make sure these incidents don't repeat themselves, sexual harassment does not work like bankruptcy, said Phil Bezanson, white collar partner at Bracewell.

"Just because they are doing their best going forward, doesn't erase liability for things they have done in the past," Bezanson said. He said potential litigants may feel emboldened to file a lawsuit after seeing the results of the investigation.

"I do a lot of harassment training for companies," said Kate Bischoff of tHRive Law & Consulting. "Sometimes after that training, the HR department gets complaints, people saying, 'I didn't want to stick my neck out, but now I know that it's a big deal.' I don't know if litigation comes out of that .... We might see more come out of Uber."

Bischoff said a lot depends on meeting various statutes of limitation, both at the state level and at the federal level under Title VII and the U.S. Equal Employment Opportunity Commission. Other factors are whether the company took "timely and appropriate action" on the claims, and whether the interactions were between co-workers or with managers. There's also the option for "commissioners charge," a different way of handling such cases.

It gets even more complicated when one considers arbitration agreements — a very common way for employers to keep legal matters private — and a release of claims that employees may sign when they resign, freeing their former employer from legal responsibility.

Uber did not immediately respond to a request for comment on whether it requires those documents, but Brooke Schneider, an associate in the Employment practice at Withers Bergman, said exiting employees can refuse to sign those agreements, or use them to negotiate more severance. Plus, those can be harder to enforce in the case of class action claims, she said.

At least one former employee has already been trying to file a claim. Documents from the California Department of Fair Employment and Housing show a former worker, whose name has been redacted from the document, filed a "right to sue" claim against Uber.

The document says:

Beginning in late 2015, a number of female colleagues sought his intervention regarding alleged sex-based discrimination and harassment they were suffering at the hands of a male supervisor. On several occasions, [redacted] raised these concerns with Uber`s HR department. Instead of investigating the allegations of discrimination and harassment and taking appropriate corrective action, HR told that 'we get a lot of phone calls from employees that we don`t always act on.'
Shortly thereafter, was subjected to a retaliatory investigation, resulting in his termination on or about March 15, 2016.

2. Recourse from a sexual assault victim

One of the most vicious accusations levied against Uber is that executive Eric Alexander, who has since left the company, obtained the medical records of 26-year-old woman who was allegedly raped by her Uber driver in 2014. According to Recode, executives had trouble believing she was telling the truth, speculating that instead the reported rape was an attempt by a competitor to sabotage Uber.

She filed a lawsuit against Uber on Thursday, claiming Uber has intruded in her private affairs and defamed her. Uber helped the prosecution in the rape case at the time it was being heard, and also settled a lawsuit with the woman in 2015. CEO Travis Kalanick publicly said at the time of the case he would do "everything to help bring this perpetrator to justice and to support the victim and her family in her recovery."

It's unclear what international laws and releases of claims apply to the case, lawyers said. Either way, the suit is "just another hit to their brand," Bischoff said.

3. Driver classification battles across the globe

Buried in an onslaught of Uber-related news this week was a New York ruling that could shake Uber's business model. Three New York Uber drivers have been granted employee benefits by a judge, a ruling that could extend to "others similarly situated," according to Law360.

Uber has long argued that drivers, who can set their own hours and own their own cars, are independent contractors. But New York, as well as other local regulators, have found that the start-up exercises considerable control over the drivers, thus treating them like employees.

While Uber headquarters might be undergoing a cultural makeover, the same protections recommended by Eric Holder's report won't necessarily extend to drivers if they are independent contractors, Schneider said. That could stoke even more contention between executives and drivers, she said.

"I look at Uber as a workplace culture that has failed. So now we know, working at Uber is not always pleasant," Bischoff said. "It's difficult, it seems to have this bro culture. Each one of these individual cases now looks more credible. So yeah if they are treating drivers poorly, there's a natural human response to take that seriously."

Uber drivers protest the company's recent fare cuts and go on strike in front of the car service's New York offices on February 1, 2016.
Spencer Platt | Getty Images
Uber drivers protest the company's recent fare cuts and go on strike in front of the car service's New York offices on February 1, 2016.

Michael Solomon, who manages freelance technology talent with 10x Management, said that the treatment of drivers is increasingly starting to affect the perceptions of Uber's technical talent.

"I'm not sure their exact timeline for rolling out autonomous vehicles widespread, but one of the big selling points is they were are making everyone a driver and creating jobs," Solomon said. "That's a big part of their story as the taxi companies are going away. Now they are completely undoing the good part. ... this a company that was very vocal about how good they were to have provided them with gigs, as they rip that out from under them."

4. Intellectual property battle with Waymo — and a regulatory investigation

Uber is also fighting Alphabet, Google's parent company, in court over the alleged actions of a former employee of both companies.

Alphabet's self-driving car unit, Waymo, has sued Uber, claiming that the ride-hailing start-up is using key parts of Waymo's self-driving technology. The fight centers around an engineer named Anthony Levandowski, who was deeply involved in Google's self-driving car initiative before leaving to found a start-up, Otto, which went on to be acquired by Uber.

Waymo's lawyers have asserted that Levandowski stole documents from Alphabet, and that Levandowski was already negotiating with Uber before he left Alphabet. Levandowski, who was fired from Uber, has tried to stay out of the fray, looking to invoke his Fifth Amendment rights. But courts are adamant that the allegedly stolen documents be recovered.

Judge William Alsup also ordered the case be referred to the U.S. attorney for investigation of the possible theft of trade secrets, offering no position on whether a prosecution is warranted.

"There are a whole hose of variables that the government takes into account," Bezanson said. "Corporate culture is one. Tone at the top, pervasiveness of wrongdoing, how the company responded. Because we have so many different subject matter issues, an overall corporate culture assessment is a good thing. The DOJ will pay close attention to it. There's a lot in front of Uber at the moment. Just because they've crossed the recent threshold of the labor investigation, doesn't mean they're done with it."

5. Regulatory probe into 'greyballing' & 6. FTC probe into data collection

The U.S. Department of Justice launched a criminal investigation into Uber's evasion of authorities last month, according to Reuters. The investigation will focus on a software, "greyball," that Uber used to stay under the radar of transportation authorities, according to The New York Times.

Separately, Recode reported this month that the Federal Trade Commission is inquiring into the way Uber handles its data. All these high profile liabilities could ultimately affect the company's ability to raise capital and go public, Schneider said.

"All the shoes are dropping now," Bischoff said.