Uber avoided a huge blow to its business model Thursday with a settlement in a pair of class action lawsuits in California and Massachusetts. The company will shell out as much as $100 million to the roughly 385,000 drivers involved in the settlement, but drivers will continue to be classified as contractors rather than employees, the New York Times reported.
While drivers won’t receive the social safety net that comes with full-time employment, they did get some other concessions, at least in those two states.
In the past, drivers could be deactivated with little explanation. Uber said they will now give drivers two warnings and an explanation before booting them from the app, and they will stop deactivating drivers who frequently turn down rides. Uber will create an appeals panel so drivers can contest deactivations.
Drivers will also be able to solicit tips, and the company will make it clear that tips are not included in the price of the ride.
A breakdown in August of how much money Uber drivers are missing as contractors found that if deemed full-time employees, drivers would receive an average of $5,500 annually in holidays and healthcare benefits, and potentially thousands more in mileage reimbursement.
The flip side is that as full-time employees, Uber drivers wouldn’t be able to drive for another app, like Lyft, or work whatever hours they choose. This independence has been the company’s primary argument when criticized about driver status.
“Drivers value their independence — the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours,” Travis Kalanick, chief executive of Uber, said in a company blog post announcing the settlement. “That said, as Uber has grown — over 450,000 drivers use the app each month here in the U.S. — we haven’t always done a good job working with drivers. It’s time to change.”
Uber will pay an initial sum of $84 million to the drivers, and will shell out an additional $16 million if the company’s valuation hits 1.5 times its current value, currently $62.5 billion, after it goes public.
Bob Berger points out in an op-ed at Forbes that the concessions could have an impact on the rider experience. Not kicking drivers off the app for turning down rides too often could result in longer wait times, and allowing drivers to contest deactivations could make the company more focused on arbitrations than on riders.
The settlement still needs the approval of Judge Edward Chen of the District Court of Northern California, which could take months. The contractor vs. employee issue is also far from over. A settlement is not the same as a ruling, as Shannon Liss-Riordan, the attorney representing the drivers in the suit, said in a statement, and Uber still faces litigations about driver status in other states.
Kelsey E. Thomas is a writer and editor based in the most upper-left corner of the country. She writes about urban policy, equitable development and the outdoors (but also about nearly everything else) with a focus on solutions-oriented journalism. She is a former associate editor and current contributing editor at Next City.