​Uber to pay $100m, drivers deemed independent contractors in California

Uber has agreed to pay up to $100 million to settle class action lawsuits over whether its California drivers are employees or independent contractors, resolving a major challenge to its business model.
Written by Asha Barbaschow, Contributor

Controversial ride-booking service Uber has agreed to pay up to $100 million to settle two class-action lawsuits over whether its California-based drivers are employees or independent contractors.

The settlement resolves a major challenge to Uber's business model, maintaining Uber drivers are in fact independent contractors, even though the lawsuit had alleged that Uber drivers are employees entitled to reimbursement of expenses.

Under the terms of the settlement, which is still to be approved by a San Francisco federal judge, Uber will pay $84 million to the plaintiffs. There will be a second payment of $16 million if Uber goes public and its valuation increases one and a half times from the company's December 2015 financing valuation within the first year of an IPO.

In a blog post made by Uber CEO Travis Kalanick on Thursday, he said key take away from both the Californian O'Connor and Yucesoy Massachusetts cases was the confirmation of the employment status of its drivers.

Kalanick said that when Uber first hit the streets of San Francisco it was easy for them to communicate with the handful of drivers using the app, with the company's marketing head individually calling each driver for direct feedback.

"It was clear from those early conversations that drivers really valued the freedom Uber offered," Kalanick wrote. "Today, while the number of drivers using our app has grown dramatically, their reasons for doing so haven't changed. In the US almost 90 percent say they choose Uber because they want to be their own boss. Drivers value their independence -- the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, and to drive most of the week or for just a few hours."

Additionally, Uber announced a handful of changes in its business practices, including a driver deactivation policy which will apply initially only across the United States if a driver is deemed unfit.

Uber has long maintained that its drivers are not employees, with the startup's Australia and New Zealand general manager David Rohrsheim saying previously the company's driver partners are "certainly not employees" as they are independent operators who are free to come and go if they do not wish to drive at a certain time.

In June, the California Labor Commission handed down a ruling to Uber deeming that a former driver was actually an employee of the company, rather than simply a contractor as Uber had argued.

In finalising a claim made by Barbara Berwick in September 2014, the court considered her employment to span the entire duration of her stint with the company, from July 25 to September 15, 2015 and awarded her $4,152.20 in unpaid expenses.

Shortly after news of the ruling broke, Uber issued a statement via its blog saying that the decision made by the commission is non-binding and applies only to a single driver.

In January, Uber's rival Lyft agreed to pay its drivers $12.5 million in compensation and tweaked their job description to finalise its own lawsuit.

The lawsuit, filed in California, called for additional protection and rights for drivers who are not classed as employees and, therefore, lack workplace protection. As a result, Lyft must give drivers notice if they are due to be removed from the platform, accompanied by a valid reason, such as poor ratings. In addition, drivers will be given the chance to rectify the situation before being booted off the platform.

Earlier this week, Uber said goodbye to the streets of Queensland, Australia after the state imposed a ban on the ride-booking service.

Not long after the ban, the Queensland government announced its plans to tweak the legislation as the contentious crackdown on Uber inadvertently made charter bus services, tourist services, chartered school bus services, community transport services, limousine services, shuttle services, and hotel accommodation transfer services illegal if not operated by a licensed taxi.

A spokesman for Transport Minister Stirling Hinchliffe on Thursday said the threat to all pre-booked passenger vehicles needed to be removed.

"The government calls on the Liberal National Party to join with us in removing the attack on community service buses, school buses, and the tourism industry," they said. "Tonight we'll seek to clean up the Liberal National Party's mess again."

Although Katter's Australian Party demerit point penalty push for Uber drivers failed, Uber has thumbed its nose at the changes, vowing to operate as normal and take fines -- which were hiked from AU$1,413 to AU$2,356 due to the legislation -- to court.

Additionally, under the new laws, companies like Uber could be penalised up to AU$23,560.

Uber public policy director Brad Kitschke on Thursday described the law as "old and outdated", saying it was difficult to be sure ride-booking participants were committing an offence.

Transport inspectors have also been given greater powers to investigate people suspected of operating an illegal taxi and a transport review of ridesharing services in Queensland is due to be handed down in August.

Previously, the Queensland government said it would be reviewing its taxi strategy, with Deputy Premier Jackie Trad saying at the time she would not rule out the coexistence of taxis and Uber services on the state's roads.

"Other jurisdictions have made a place for Uber without diminishing the importance of the taxi industry that's already established," she said.

Queensland joins the Northern Territory in denying the use of ride-booking services, with the NT government announcing reforms to its taxi industry last month, saying it "will not be making any regulatory changes authorising point to point ridesharing transport services".

Earlier this month, the South Australian government announced that ride-booking services such as UberX will be allowed to operate on the state's roads from July 1, 2016.

South Australia joined New South Wales and the Australian Capital Territory in allowing the service to operate on its roads, whilst the Victorian government, Western Australia government, and the Tasmania government are all gearing up to follow suit.

With AAP

Editorial standards