Uber settles with most of the 60,000 drivers who sued for misclassification

Uber Technologies Inc. reached a preliminary settlement worth $146 million to $176 million with drivers claiming they are misclassified as independent contractors on the eve of its long-awaited initial public offering, the company reported Thursday.

The agreement appeared in an update to the company's SEC disclosure filings. According to the document, the company's deal is with a "majority" of 60,000 drivers who sued for misclassification but were subject to arbitration agreements, and had either filed or declared intent to file individual demands.

The settlement also appears to have overshot the company's estimates; the document states the company had set aside $132 million in December for a potential deal.

In reaching the settlement, Uber appears to have cleared a significant cloud hanging over its entry into the public market -- thousands of drivers nationwide went on strike Wednesday over claims of diminished wages and misclassification.

In addition, the company's disclosures noted that recent legislative efforts and court rulings such as California's Dynamex decision, which established a rigid employee-presumptive test for independent contracts, present a threat to its business.

"Our business would be adversely affected if drivers were classified as employees instead of independent contractors," it wrote in the document.

Though the company defanged a major challenge with the settlement, more lie on the horizon. Resolution of misclassification battles with drivers have stopped short of tangling with Dynamex and the merits of the workers' roles so far, but pending lawsuits brought by competitors on unfair competition grounds could be harder to evade.

For example, in one such case, Diva Limousine alleges that the company undercuts and kills competitors via an illegal pricing model made possible by misclassifying drivers.

"The California Supreme Court explained in Dynamex -- a case Uber flatly ignores -- that misclassification gives an employer an 'unfair competitive advantage ... over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees,'" wrote attorneys for Diva in a recent brief in that case.

Uber did not respond to a request for comment by press time.