Uber settles driver classification lawsuit for $20 million

Uber Technologies Inc. settled a lawsuit over the classification of its drivers Tuesday for $20 million, a deal resolving two high-profile lawsuits filed against the company.

The complaints -- one filed in California in 2013 and the other in Massachusetts in 2014 -- accused the company of misclassifying drivers to avoid paying minimum wage and offering health benefits provided to traditional employees.

The settlement comes in the midst of speculation that Uber is preparing to go public. The company is one of a handful of "unicorn" startups, meaning its value is estimated at more than $1 billion. Uber and others in its unicorn cohort, like office messaging provider Slack and home rental service Airbnb Inc., have flirted on the edge of the public market in the past year without taking the plunge.

At one point, the settlement dicussions reached a figure of $100 million, with some of that amount payable after Uber submitted an IPO. That settlement was thrown out after a 9th U.S. Circuit Court of Appeals panel ruled the class was invalid because of Uber's enforceable private arbitration clause.

That dropped the number of valid plaintiffs from hundreds of thousands to 13,600. O'Connor v. Uber Technologies, Inc., 904 F. Cal. App. 3rd 1087 (9th Cir. Sept. 25, 2018).

"This settlement will pay approximately 6 times as much to drivers who are not covered by arbitration clauses as drivers would have received from the $100 million settlement that was proposed in 2016, although to a much smaller group of drivers," said Shannon Liss-Riordan, the attorney for the drivers, in an email.

In addition to the monetary settlement, Uber also changed certain policies regarding the deactivation of Uber drivers' accounts and made the process more transparent, according to the settlement. The new measures include posting an online policy that provides advance notice to drivers of deactivation for certain offenses and implementing an appeals process for deactivated drivers.

However, the settlement doesn't resolve how drivers should be classified. For Uber, drivers will continue to be independent contractors instead of employees. Liss-Riordan said it's an industry-wide issue that she continues to litigate.

"This is not the end of the issue of driver classification," Liss-Riordan said in an email. "We are continuing to pursue many cases against gig economy companies (and others) that are misclassifying their workers as independent contractors, in order to save on labor costs and shift the risks and expenses of operating a business to their low wage workers."

Uber did not immediately respond to the Daily Journal's request for comment.