UBER has settled two class-action lawsuits — one filed in California in 2013 (O’Connor) and one in Massachusetts in 2014 (Yucesoy) — by drivers who sought to be considered employees rather than independent contractors. In those cases, plaintiffs were seeking additional compensation, including reimbursement for expenses and tips. The two cases had about 385,000 drivers as class members.
In the settlement reached in April 2016, UBER agreed to pay $84 million to the class of plaintiff-drivers. UBER will pay an additional $16 million if it goes public and if its valuation increases by one and a half times its 2015 valuation within the first year of an IPO.
Additionally, under the terms of the settlement, drivers will remain independent contractors and not employees. UBER will provide drivers with more information about their individual ratings and how each driver compares with his or her peers. It agreed to introduce a policy explaining the circumstances under which UBER deactivates drivers from using its app. The company’s official driver deactivation policy has been posted. UBER also agreed to create an association in each state to allow drivers a venue for discussing drivers’ issues. Furthermore, UBER drivers will be allowed to post signs in their cars that tell passengers that while not required, tips are welcome.
While a judge needs to approve the settlement, UBER’s Co-Founder and CEO Travis Kalanick issued a press release highlighting the settlement terms. He views the resolution a win for the company. He expressed that many drivers prefer to be their “own boss” and would remain independent contractors under these settlement terms. As Mr. Kalanick explains, “Uber is a new way of working: it’s about people having the freedom to start and stop work when they want, at the push of a button. As we’ve grown we’ve gotten a lot right—but certainly not everything. “
Lessons to be learned from UBER? Companies should review how they classify workers. Companies should also review and update any third party services agreements they are currently working under. Misclassification creates risks for companies that may lead to costly class action lawsuits.