The fight over the classification of ride-sharing drivers as independent contractors appears to be over after Uber announced that it settled a pair of long-gestating lawsuits for $20 million. The resolution is a boon to Uber, which is preparing its initial public offering for later this year.
The initial case, O’Connor v. Uber, was first brought by a group of Uber drivers in 2013 who argued they should be categorized as employees rather than freelancers. By classifying drivers as contractors, Uber avoids providing benefits of traditional employment such as health insurance, paid sick time, and workers’ compensation, the drivers argued.
O’Connor v. Uber has been winding its way through the courts for over six years. It was almost settled in 2016, when Uber agreed to pay as much as $100 million to the roughly 385,000 drivers represented in the class action lawsuit and one other case, so long as it could continue to classify them as freelancers. But the settlement was later rejected by a federal judge, who argued that the amount was insufficient.
Since then, the tide has shifted in Uber’s favor. The US Supreme Court issued a ruling bolstering the power of employers to force workers to use individual arbitration instead of class action lawsuits.
Last year, the Ninth US Circuit Court of Appeals reversed O’Connor v. Uber’s class certification status, nullifying the decision on the ground that Uber’s arbitration clause prohibits class actions. The appeals court ruling ultimately reduced the size of the class to about 13,600 drivers who will participate in the settlement.
Shannon Liss-Riordan, an attorney representing Uber drivers in the case, said she was “pleased” with the settlement. Under the agreement, drivers will receive approximately 37 cents per mile for the miles they have driven for Uber, she said. Also, Uber agrees to better explain its deactivation policy to drivers, create a deactivation appeals process, and help drivers who were deactivated get back on the platform. Drivers who were removed from the lawsuit by the appeals court ruling would need to pursue their claims in individual arbitration if they want any relief.
“This is not the end of the issue of driver classification,” Liss-Riordan said in an email. “We are continuing to pursue many cases against gig economy companies that are misclassifying their workers as independent contractors, in order to save on labor costs and shift the risks and expenses of operating a business to their low wage workers.” She cited pending cases against Amazon, GrubHub, Lyft, DoorDash, Postmates, Handy, among others.
The settlement still requires a judge’s approval, but Uber is ready to put the past behind it. “Uber has changed a lot since 2013,” a spokesperson said in a statement. “We have made the driver experience even better through improvements like in-app tipping, a redesigned driver app, and new rewards programs like Uber Pro. We’re pleased to reach a settlement on this matter and we’ll continue working hard to improve the quality, security and dignity of independent work.”