Posted: Apr 25, 2016

Uber Settlement– Tip Money for Drivers

Uber has pair of class-action lawsuits in California and Massachusetts that had sought a judicial determination that its drivers are employees, not independent contractors, as the company has long insisted. The agreement, according to the New York Times report, is a “landmark … that could have lasting implications for the long-term viability of the ride-hailing service.”

Uber, by labelling its employees independent contractors, sidestep the costs of full-time employees, including paying minimum wage, Social Security tax and overtime pay obligations. Even more important, especially in California, the independent contractor obligations means Uber’s workers can be required to pay for their own cars, gas and other costs.

Under the settlement, filed in the United States District Court in the Northern District of California, Uber will pay $84 million (or as much as $100 million, depending on whether Uber goes public at a high price)  to the roughly 385,000 drivers represented in the cases. The company also agreed to several concessions to appease driver concerns, including giving more information on how and why drivers are barred from using the app, as well as aiding in creating new “drivers associations” in both state.

“Importantly, the case is being settled — not decided,” Shannon Liss-Riordan, the attorney representing the drivers in the suit, said in a statement.

Other suits could revive the same argument for drivers– more than a dozen such suits are pending around the country. But this one was far along, with the court having already certified it as a class action and having rejected for the most part Uber’s argument that driver claims must be arbitrated. Those rulings, however, were being appealed, adding uncertainty to the case going forward.

Drivers on average will receive $200-$300, though some could receive thousands, depending on how much they drove and how many drivers stake a claim. Indeed, a Marketwatch says that the settlement could net most drivers $24 or less!

Later reports indicated that Uber could have been required to pay drivers more than $800 million if it lost at trial. More important, it might have been required to treat its drivers as employees going forward.

A judge will have to approve the settlement, which is not a foregone conclusion as a different judge recently rejected a similar agreement involving Lyft.

The full agreement can be read here.

Uber’s statement about the deal is here.

Shannon Liss-Riordan’s statement is here

Other links:

A Boston Globe article in which drivers attack the terms of the settlement.

A L.A. Times report summarizing the deal is here.

A Recode anlysis concluding that almost nothing is changing is here.

Apr 25, 2016 | Filed under: Blog by Dan Ackman

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