Uber will pay $84 million to neutralize two massive lawsuits that posed a threat to its business model and make a handful of small but significant changes to driver policies, the company announced late Thursday.
The settlement payout amounts to just over $200 apiece for the 385,000 or so Massachusetts and California drivers represented in the cases — before factoring in attorneys’ fees. If Uber goes public and its stock jumps by a certain percentage in the first year, a second $16 million payment would be triggered.
The drivers had alleged that the company treats them like employees but pays them like independent contractors, an illegal business practice called misclassification that saves companies huge sums of money because contractors are entitled to fewer labor law protections.
Uber decided to settle after many months of fighting to shrink the size of the plaintiff class in the California case and to have these and other lawsuits thrown out on other grounds. The deal is a win for the company: Drivers will remain contractors, saving the company from paying payroll taxes, minimum and overtime wages, and reimbursements for driver expenses. And for a company with over $60 billion in on-paper value, a potentially $100 million deal barely dents the piggy bank.
Individual drivers will be able to opt out of the deal and retain their individual right to sue over the misclassification allegations or other issues should they choose. But the only real remaining hurdle to the settlement is from the presiding judge in the cases, Edward Chen, who can order lawyers for all parties to revise the deal if it doesn’t satisfy him.
But the settlement isn’t just about money. And the other provisions Uber is agreeing to could have a significant impact on how drivers and riders both experience the car-hailing service.
The company released a formal Driver Deactivation Policy for the first time Thursday night, giving drivers a clear handle on what would prompt Uber to cut them off.
“It’s incredibly important that when people use Uber, they have a great experience…this is safe, reliable, convenient and a good value,” CEO Travis Kalanick wrote in a statement detailing the settlement with drivers. Rider safety, particularly for women, has become a flashpoint in coverage of the company over the past year.
Uber drew ire last month over leaked screenshots
of search results from its customer support database indicating about 12,000 rider complaints involving the words “sexual assault” or “rape.” The company says that fewer than 170 of those 12,000 were actually customers alleging sexual violence, and that the staggering numbers in the search screenshots are a byproduct of how the query feature of its database returns results.
The deactivation policy is Uber’s most public attempt yet to explain how it exerts top-down control over who can drive for the brand, to protect both riders’ safety and the company’s bottom line. Kalanick’s statement acknowledged that it should have been clearer about such policies sooner.
The deal’s other provisions will be more interesting to policymakers and researchers who have fixated on the lawsuits’ implications for the so-called “gig economy” in general. The firm is making a couple of concessions on driver policy issues that economists and drivers alike have identified as snags in the system.
Drivers will no longer get fired for declining trips while logged in, the company’s statement says. That reverses a longstanding policy of “deactivating” drivers who let their acceptance rate dip below about 80 percent. Progressive economists critical of Uber flagged that acceptance-rate policy as a key piece of evidence that drivers function more like employees than contractors, as ThinkProgress previously reported.
The deal also promises to create formal drivers associations in Massachusetts and California. Those structures won’t have the full bargaining powers of employee unions, but the company says it will hold quarterly meetings with the groups to solicit driver feedback.
California App-based Drivers Association head Joseph Sandoval DeWolf sounded a cautiously optimistic note on that forward-looking component of the deal. “If Uber is going to be genuine about this, I think it’s a very, very good move,” he told the New York Times.
By backing down on acceptance rate rules, establishing worker associations, and delivering a clear and public deactivation policy, Uber seems to have addressed most of the core policy issues behind a recent push for adding a new category to American labor law.