Uber announced yesterday it had agreed to settle a pair of class action lawsuits that could see the company pay out as much as $100 million to the drivers represented in the cases, but it will continue to classify them as independent contractors and not employees – representing a significant win for the ride-hailing company.
In reaching the agreement, Uber has agreed to pay $84 million to the 385,000 drivers from California and Massachusetts, with a further $16 million to be paid if the company goes public and achieves a valuation increase 1.5 times its December 2015 value of $62.5 billion.
The amount of money each driver receives will be based on the number of miles they have driven with an Uber passenger.
As the settlement – which must still be approved by a judge – will keep the drivers classified as independent contractors, Uber won’t be required to pay them minimum wage or provide certain worker benefits such as overtime and healthcare.
Despite the large payout, reclassifying the drivers would have cost Uber a lot more in the long run, and set a precedent for other services that use the same contractor business model.
The company has, however, made some concessions. Uber will provide more information about driver ratings, how they are calculated, and comparisons with peers. It will also help create a “drivers association.” Additionally, drivers will be allowed to place signs in their vehicles stating that “tips are not included” and would be appreciated, according to Shannon Liss-Riordan, an attorney who worked on the case.
Uber has published a new deactivation policy that explains what circumstances can lead to a driver getting banned. While drivers that decline rides won’t be deactivated, refusing to pick up a passenger based on race or sexual orientation can result in a ban.
The decision only affects drivers in California and Massachusetts. Uber is still facing class action suits over driver classifications in several other states.
Back in January, Uber rival Lyft agreed to pay $12.25 million to its drivers in a similar case. But this was rejected by a federal judge in April.