Uber reaches settlement in major driver status lawsuits

Uber will pay drivers up to $100 million dollars and make changes to its business practices as part of a settlement with drivers who had brought class-action lawsuits in two states over their legal status as independent contractors.

But the settlement allows the ride-hailing service to continue treating its drivers in those states as contractors, who do not get the benefits and protections afforded to many employees.

{mosads}If the settlement is approved in the two cases, brought in California and Massachusetts, Uber will pay out as much at $100 million to hundreds of thousands of drivers. Eighty-four million dollars of the settlement is guaranteed, with an additional $16 million coming if the company goes public and reaches a certain value.

The company will also make other changes to the way it deals with drivers. It will provide them with more information about their overall rating on the application and create more restrictions on when Uber can remove a driver from its platform, among other changes.

Uber on Thursday also announced it had published a guide to why it “deactivates,” in its parlance, drivers. The company also said that under the settlement, it would no longer block drivers for regularly turning down fares.

“When drivers aren’t available, we’d just ask they turn off the app,” said Uber CEO Travis Kalanick in a blog post announcing the change. “And where drivers do have low acceptance rates — perhaps because they are multitasking at home — we will alert them to the issue. If things don’t pick up, we may log them out of the app for a limited period of time.”

In both states, the company will also work to create “drivers associations” that will elect leaders to, according to a court filing, “create a dialogue” around issues of concern to drivers. Uber has said it will meet four times a year with those leaders.

The company’s decision to settle the lawsuits helps them dispense with some of the most high-profile litigation in the country centered on a simple question: Are Uber drivers contractors or employees in the eyes of the law?

Uber has always insisted that they have acted properly, arguing that because drivers set their own hours, can drive for its competitors and frequently work only part-time to supplement other earnings, the drivers should be considered contractors. Some drivers and labor groups have disagreed, arguing that the relationship between the company and the drivers more closely resembles that between an employer and traditional employee.

Kalanick praised the fact that the company would not have to reclassify its drivers, but he said many of the changes mandated by the proposed settlement would help the company — which has expanded quickly around the world — treat its workforce more professionally.

“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 said. “For example, we don’t have a policy explaining when and how we bar drivers from using the app, or a process to appeal these decisions. At our size that’s not good enough. It’s time to change.”

Two of the lawyers who brought the cases acknowledged in an email that some could be frustrated that the case never went before a jury but said the settlement was an important and influential victory for the drivers.

“This case, however, with this significant payment of money, and attention that has been drawn to this issue, 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 Shannon Liss-Riordan and Adelaide Pagano.

“As a result of this litigation, many companies have chosen to go the other way and not fight this battle, and instead to classify their workers as employees with all the protections that accompany that classification.”

Uber still faces litigation in other states and potential challenges to its labor policies by state regulatory agencies. And a federal judge rejected a settlement in a similar case involving Uber’s rival Lyft earlier this month because he said it failed to adequately compensate drivers. 

But settling the two cases is nonetheless a landmark moment in a debate that has struck at the core of how startups in the on-demand economy operate and appeared on the radar of some in Washington.

Sen. Mark Warner (D-Va.) has made appearances at think tanks and in Silicon Valley to argue for policies that would help create a safety net not just for workers who work for the startups, which provide services from a ride to home-cleaning, at the tap of a smartphone screen.

He has more recently warmed to the idea of finding a way for the companies themselves to experiment with offering benefits without facing a fear of legal reprisal. It remains to be seen whether such an idea is legally feasible. He has said he still plans to introduce legislation on the broader issue of benefits in the on-demand economy eventually.