On March 5, 2018 I reported that the EEOC announced a settlement in its first lawsuit alleging that parental leave policies which granted more rights to mothers discriminated against new fathers. Details on the lawsuit’s allegations can be found here. The EEOC’s press release was devoid of details about the terms of the settlement. On July 17, the details became public, and they are likely to send shock waves through HR departments and C suites. Continue Reading Estee Lauder Agrees to Pay $1.1 Million to Settle Discrimination Suit Filed by EEOC on Behalf of New Dads

Photo: Jason Lawrence via Flickr (CC by 2.0)
Photo: Jason Lawrence via Flickr (CC by 2.0)

Upon a motion for preliminary approval of the class-action settlement for $100 million, a federal court found that the settlement between Uber and drivers in two states was “not fair, adequate and reasonable” and denied approval.  It ordered the parties to confer about how they wanted to proceed.  A joint status report is due on September 8th and a status conference is scheduled with the court for September 15th.

The litigation involves current and former Uber Technologies Inc. drivers in Massachusetts and California who brought claims alleging that they were improperly classified as independent contractors rather than as employees.  The actions cover about 385,000 drivers.  After three years of contentious litigation, and on the eve of trial earlier this year, the parties reached a settlement of these two class-action lawsuits.  Among other terms, Uber agreed to pay $84 million plus an additional $16 million depending if the company went public.  Drivers would remain classified as independent contractors and Uber agreed to institute certain processes and procedures internally.  See my previous post about some of the settlement terms.

In his review of the proposed settlement, Judge Edward Chen of the U.S. District Court for the Northern District of California cited case law noting that “whether a settlement is fundamentally fair…is different from the question whether the settlement is perfect in the estimation of the reviewing court.”  But “when…the settlement takes place before formal class certification, settlement approval requires a ‘higher standard of fairness.'”  As the judge explained, in this case, “because the Settlement Agreement covers the claims of both certified class members and drivers who fall outside the class definition and thus have not been certified (for example, all Massachusetts drivers and the California drivers who drove for a third-party transportation company or under a corporate name), this Court must apply the more ‘exacting’ standard in determining whether this settlement is fair, adequate, and reasonable.”

Of primary concern to the court was that the $1 million allocated to California’s “Private Attorneys General Act” (PAGA) claim was modest.  PAGA is a law that allows private citizens to seek civil penalties for labor violations.  The judge noted that the settled PAGA portion was .1% of the potential $1 billion-plus statutory penalty against Uber claimed in the lawsuit.  “Here, the court cannot find that the PAGA settlement is fair and adequate in view of the purposes and policies of the statute.”  Essentially, the federal court found that the amount of the settlement allocation to the state was not large enough.

The court also ruled that the arbitration provision on appeal deserved further consideration. The appeal pending at the 9th Circuit Court of Appeals on an earlier decision by Judge Chen involves a determination as to whether certain arbitration agreements signed by drivers are enforceable.  Judge Chen recognized that if he were reversed on appeal, it would have a significant impact on the case as many of the drivers would need to proceed through arbitration.

Both sides have reported their disappointment in the ruling.  This ruling by the federal court, however, does not prevent the parties from reaching a new settlement which addresses the judge’s concerns, particularly as to the PAGA.

This case is being watched closely by those companies using on demand workers.  It is also a good reminder about the potential class-action liability employers face for the misclassification of a group of employees.   All employers should be reviewing their independent contractor classifications to make sure those persons are not really employees under an incorrect label.

Photo: Jason Lawrence via Flickr (CC by 2.0)
Photo: Jason Lawrence via Flickr (CC by 2.0)

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.

Apparently Patrick Snay never gave his daughter the sage advice my father, a naval veteran of World War II (OK, he went in after the war and made it as far as Jamaica, but the point still stands) gave me.  Dad always reminded me to be cautious in sharing information with the world because as the old adage goes “loose lips sink ships.”  Dad was never exposed to the viral world of Facebook, and in my college years I couldn’t have shared private information with 1200 friends unless I took out an ad in Boston Globe.  But it was still good advice.

Mr. Snay wasn’t so lucky.  When his contract as the Headmaster of a school in Florida was not renewed, he filed a complaint of age discrimination against Gulliver Schools, Inc.  He was able through his attorneys to negotiate a nice settlement consisting of $10,000 in back wages, $80,000 in compensatory damages and $60,000 in attorney’s fees.  The settlement agreement contained a very specific and very strict confidentiality provision by which Snay agreed not to disclose even the existence of the settlement to anyone but his attorneys, professional advisors or spouse.  Unfortunately, Snay told his college aged daughter, an alumna of Gulliver, that the case settled and that he was pleased with the result.  Within days the daughter posted the following on Facebook:  “Mama and Papa Snay won the case against Gulliver.  Gulliver is now officially paying for my vacation to Europe this summer.  SUCK IT.”  The post was open to her 1200 friends, many of whom had also attended Gulliver.

Not surprisingly Gulliver did not take kindly to this very clear breach of the agreement and declined to pay the $80,000.  After all, the information they wanted to keep secret was broadcast to just the audience from which they most wanted to keep it.  The Third District Court of Appeal in Florida sided with Gulliver.  The court found that the plain and unambiguous meaning of the confidentiality paragraph, which was central to the settlement, was that neither Snay nor his wife would disclose “either directly or indirectly” any information regarding the existence or terms of the parties’ agreement.  Snay told his daughter, and she told the world.  And now Snay is out $80,000, and one might imagine that the daughter never made it to Europe for the summer.