Uber might have just dodged the biggest bullet aimed at its disruptive, ride-sharing business model. In a massive settlement announced last night, Uber will pay up to $100 million to drivers who sued the company in an effort to be considered employees. In return, drivers agreed to remain independent contractors.
While this may seem like a distinction in name only, the legal status of Uber's workforce has an enormous numerical impact on Uber's bottom line.
Settle Down, Now
The settlement had been a long time coming, and arrived just in time for Uber -- the case was scheduled for trial in June. The drivers had scored a couple victories in the run-up to trial, with the Ninth Circuit upholding the lawsuit's certification as a class action. While some were eager to see how a jury would view Uber drivers, both sides can something with the settlement.
Around 385,000 drivers in California and Massachusetts will divvy up $84 million, a number that could climb as high as $100 million, depending on Uber's valuation reaches 1.5 times its current value. And Uber continues to avoid paying drivers expenses and benefits, which would be necessary (and necessarily eat through the company's profits and market valuation) if drivers were classified as employees.
All Part of the Contract
In addition to the buyout, Uber will have to make some changes to how it treats its
employees independent contractors:
Additionally, Uber agreed to help create drivers' associations in California and Massachusetts. These groups aren't officially unions, but like unions they can allow workers to bring grievances to management. Shannon Liss-Riordan, an attorney for drivers, released a statement indicating that nothing in the settlement precludes other courts or U.S. labor authorities from classifying Uber drivers as employees, as the California Labor Commission has already done.