Uber Drivers Are Independent Contractors, Will Receive Up To $100M In Settlement
For the better part of three years, Uber drivers have sparred with the ride-sharing company over the status of their employment: are they independent contractor or actual employees? Today, Uber has agreed to settle two lawsuits over the issue, paying up to $100 million to the drivers who will remain independent contractors.
Uber announced Thursday that it planned to settle the two lawsuits, paying $84 million to 385,000 drivers who sued the company in California and Massachusetts. The payout could increase by $16 million if Uber’s valuation reaches at least 1.5 times its current level when the company either goes public or is acquired.
While the payout may be a victory for the plaintiff drivers, Uber is walking away with what is likely the bigger win in the long-run — being able to continue to labeling drivers as independent contractors instead of employees.
The lawsuits alleged that drivers for Uber are misclassified employees, who should have their vehicle expenses covered by their “employer,” Uber.
The business model employed by Uber allowed the company to grow rapidly without the worry of covering driver expenses such as gas and mileage, or providing benefits such as health insurance, Social Security, overtime or sick days.
Drivers submitted declarations to the court back in 2015 saying, in part, that Uber misled them about the benefits that employees receive, such as having their employer pay part of their Social Security taxes, and having vehicle costs reimbursed.
The deal, which still needs to be approved by the court, would distribute the $84 million among drivers in California and Massachusetts who performed at least one trip up until the date of the preliminary settlement approval, the Los Angeles Times reports.
Payments will be determined based on miles driven with a passenger in the car, with drivers who logged more than 25,000 miles receiving $8,000 or more.
As part of the agreement, Uber agreed to make changes to its business practices, including creating a policy for deactivation of drivers. Instead of doing so at-will, Uber says it will provide drivers with warnings and give them opportunity to correct any issues before they’re taken off-line.
A panel will also be created so that drivers who feel they were unfairly terminated can appeal the decision.
While these changes won’t generally impact a passenger, one stipulation of the settlement will: tips.
Under the agreement, Uber will make it clear to riders that tips are not included in Uber’s fares. As such, drivers will be permitted to solicit tips from passengers.
“Uber has become an important part of many drivers’ lives, whether they drive all week or for a couple of hours to help pay the bills,” Travis Kalanick, CEO of Uber said in a blog post. “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.”
By settling the cases, Uber appears to be trying to put the matter behind it, however, that may not be the case. Earlier this year, a similar settlement reached by Lyft was rejected by a judge.
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