A U.S. judge on Thursday (Aug 18) rejected a US$100 million (S$134 million) deal cut by Uber to settle class-action litigation challenging the treatment of drivers as contractors instead of employees.
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In May, the proposed settlement was immediately criticised by Uber drivers, who submitted more than 20 settlement objections to Chen, as well as other lawyers.
What would the roughly 385,000 Uber drivers affected by the suit according to CNET have actually received under the terms of the settlement? A companion case was being litigated in MA alleging similar facts.
Uber took an aggressive position, in effect daring U.S. District Judge Edward Chen to reject the agreement over tips and expenses reached in April. However, it needed to receive a final approval from the federal judge overseeing the case.
In the decision, he signaled that he would smile upon the deal if it involved more money.
While the rejection may seem like a temporary win for the drivers eager to take the case to trial, sticky legal hurdles would make it much more hard for the plaintiffs to win as large a financial award as the current settlement. It would enable the class to collect at least $84 million.
However, a San Francisco judge has ruled that the settlement was “not fair, adequate or reasonable”.
Chen weighed the risk to both sides.
The deal would have ended one of the most noteworthy independent contractor misclassification lawsuits.
Uber’s entire business model (for now) relies on its ability to quickly and easily recruit large numbers of independent workers as drivers.
Thursday’s ruling could result in drivers receiving little or no recompense from Uber, however. Uber apparently couldn’t promise that would happen, and Chen said $84 million was a “substantial discount” on what the drivers could have walked away with. He noted that he could not consider the $16 million portion of the settlement that was tied to a potential IPO because there was no evidence in the court record to demonstrate the likelihood that the contingency would be triggered.
Uber could be in line for a bigger financial hit as long as the ruling is upheld and the case moves forward. PAGA settlements, as Liss-Riordan’s statement said, have historically represented a small fraction of the theoretical value of the state’s statutory claims. But the drivers proposed settling those claims for just $1 million, or 0.1 percent of the potential award.
Chen also had reservations about the non-monetary aspects of the settlement, including the new tipping policy.
Uber believes it can not classify drivers as employees as they work on a freelance basis. Specifically, the proposed deal assured drivers that they could only be removed from service if Uber could show “sufficient cause”, and provided drivers with an appeals process and arbitration available if they disagreed.
Drivers will also be allowed to place signs in their cars telling riders: “Tips are not included, they are not required, but they would be appreciated”. In March, Uber was accused of impeding the NLRB’s ongoing probe into drivers’ employment status.
US District Judge Vince Chhabria in April had rejected an earlier US$12.5 million offer, saying it shortchanged drivers because it didn’t properly account for the company’s rapid growth. “Plaintiffs appear to treat the PAGA claim simply as a bargaining chip in obtaining a global settlement”.
What’s Next For Gig Employers? Assuming a revised agreement can not be reached, it now seems very likely that the scope of this case may be drastically reduced to about 8,000 drivers, because of Uber’s arbitration clause.
If the two sides can’t strike a new agreement, a trial could bring that back into play. But others challenged it, and it could potentially impact more than a dozen other lawsuits pending against Uber.
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I’m having ridesharing lawsuit settlement déjà vu.
