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Uber settles class action regarding classification of its drivers as independent contractors

Last week, a settlement was announced in the class action lawsuit against Uber covering its drivers in California and Massachusetts.  The lawsuit centered around the issue of whether the law required Uber to classify its drivers as employees instead of independent contractors.  Uber and the law firm representing the drivers have issued statements describing the terms of the settlement.

Due to the settlement, the legal classification of Uber drivers is still unresolved.  Indeed, there is still a case wending its way through the California court system on this issue.  Nevertheless, the settlement, if the court approves it, will produce some significant changes at Uber.

The issue of whether a worker is an independent contractor or employee oftentimes boils down to how much control the company has over the worker.  Some of the reforms that Uber has agreed to in the settlement seem to push Uber drivers closer to the definition of independent contractors, including an agreement that Uber will no longer deactivate drivers because they choose not to accept riders.  This will give Uber drivers more control over rides they accept.  They will be able to decide, for instance, to only pick up riders who want to go certain places.  That way, if a driver wants to start making their way home at the end of the day, they won’t have to accept a rider that wants to go in the opposite direction of the driver’s home.

Other reforms that Uber has agreed to in the settlement seem to push Uber drivers closer to the definition of an employee, such as a ban on Uber deactivating drivers without cause and an appeals process to challenge deactivation decisions.  Independent contractors do not normally have such protections.  For example, if you hire a contractor to mow your lawn every year but decide this year to mow your own lawn, you would not have to face an appeal from the contractor when you tell him that you won’t need his services this year.

The settlement also requires Uber to pay out approximately $84 million to the drivers plus an additional amount that could reach as much as $16 million for a total potential payout of about $100 million.  The Uber drivers will also benefit from the settlement because Uber will now permit drivers to post signs in their cars that say “”tips are not included, they are not required, but they would be appreciated.”  Many Uber riders assume that tips are already included in the fare but they are not.  By more accurately disseminating this information, many more riders will likely tip their drivers just like they do for taxi drivers.

As mentioned above, because this case settled, there is still legal uncertainty over whether Uber drivers are employees or independent contractors.  So, there will likely continue to be litigation over this issue.