Labor & Employment

Uber to pay up to $100M to settle claims of misclassification by drivers in 2 states

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With a June trial looming in a California class action by 240,000 current and former drivers who claimed they were misclassified as independent contractors, Uber Technologies Inc. agreed on Thursday to settle the case for as much as $100 million.

The settlement of that federal suit, which was brought in San Francisco, also includes a similar Massachusetts case in which another 145,000 plaintiffs are represented by the same lawyer, according to Bloomberg and the New York Times (reg. req.). The settlement agreement must still be approved by the court before it is final.

The settlement leaves unanswered the question of whether individuals who use their own vehicles to pick up passengers who arrange for a paid ride by an Uber-vetted driver through a smartphone application really are independent contractors.

However, avoiding a potentially adverse finding that drivers are employees is a win for Uber, said attorney James Evans, who represents companies in employment litigation. “They leave it an open issue, and that’s desirable from their standpoint,” he told Bloomberg. “This maintains the status quo, without figuring out if these people should be treated differently or not.”

Although the independent-contractor issue remains undecided, from the drivers’ standpoint the case “stands as a stern warning to companies who play fast and loose with classifying their workforce as independent contractors, who do not receive the benefits of the wage laws and other employee protections,” said attorney Shannon Liss-Riordan in a written statement provided to the news agency. She represents plaintiffs in the Uber case.

“Drivers value their independence—the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours,” said Uber’s chief executive, Travis Kalanick, in a blog post.

“That said, as Uber has grown—over 450,000 drivers use the app each month here in the U.S.—we haven’t always done a good job working with drivers,” he continued. “It’s time to change.”

The settlement requires Uber to pay plaintiffs $84 million, plus another $16 million if the company goes public and its value increases substantially. The amount individual drivers are to get depends on the number of miles driven. Those who have logged 25,000 miles or more will get more than $8,000, Liss-Riordan tells Bloomberg.

If the plaintiffs had won at trial, their claims for reimbursement for expenses and tips could have added up to hundreds of millions of dollars, the news agency reports. The company might also have been liable for for additional penalties that could have doubled the verdict.

Similar suits are still pending against Uber in Arizona, Florida and Pennsylvania, the Times reports.

Terms of the agreed settlement include a provision that allows drivers to post signs explaining to passengers that tips aren’t part of the basic fare and would be appreciated. Additionally, Uber will make its procedures for penalizing drivers for refusing and canceling rides more transparent, and allow drivers more leeway to make such decisions without losing access to the smartphone application.

Uber will still be able to set fares and subtract commissions of approximately 20 percent, and drivers will remain responsible for supplying the vehicle and paying all expenses, including insurance, the Los Angeles Times (sub. req.) reports.

The Wall Street Journal (sub. req.) also has a story.

Related coverage: “Uber driver is employee, not independent contractor, California Labor Commission says” “California state judge rules against Uber’s arbitration agreement with drivers”

See also: “Lyft pays $12.25M to settle California worker-misclassification lawsuit” “Is Uber ride-sharing app a price-fixing scheme? Federal judge OKs conspiracy suit against CEO”

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