Have you ever used Uber to get to a destined location? What is Uber? If you don’t already know, Uber was created as part of the sharing economy. Drivers sign up with the company to provide taxi-like services, using their own vehicles, to customers looking for rides. Uber has been in labor disputes and recently settled two major class action suits in which its drivers challenged their classification as independent contractors as unfair denial of benefits associated with being employees. Contract employees can be their own boss and have flexibility over how much or little they choose to work versus full-time employees would be covered by federal labor laws and other regulations which would have entitled the drivers to coverage under minimum wage laws, unemployment benefits, workers’ compensation etc.
The settlement covers approximately 385,000 drivers in California and Massachusetts. Uber agreed to pay the plaintiffs $84 million, with a second payment of $16 million if the company goes public and its valuation increases one and a half times from that of December 2015. Regardless, Judge Edward Chen, presiding over the case in Northern California Superior Court, must still approve the settlement for it take effect. This case “stands as a stern warning to companies who play fast and loose with classifying their workforce as independent contractors, who do not receive the benefits of the wage laws and other employee protections”, noted Shannon Liss-Riordan, lawyer representing the drivers in the suits.
Both parties in this settlement gain to win—Plaintiffs have agreed to remain as independent contractors in exchange for up to $100 million and other non-monetary terms. Uber avoids the possibility that its drivers could be characterized as employees.