Uber agreed to settle two class-action lawsuits for up to $100 million in a deal that keeps its drivers classified as independent contractors, not employees. The deal includes drivers in California and Massachusetts who had claimed they were misclassified as independent contractors.
CEO and co-founder Travis Kalanick announced the settlement Thursday in a blog post.
Drivers will remain independent contractors and the ride-sharing company will pay $84 million to the plaintiffs. The plantiffs will receive a second payment of $16 million if Uber goes public and its valuation increases one and a half times from its December 2015 financing valuation within the first year of an IPO.
“Uber is a new way of working: it’s about people having the freedom to start and stop work when they want, at the push of a button,” Kalanick wrote in the blog post. “As we’ve grown we’ve gotten a lot right — but certainly not everything.”
The settlement calls for Uber to provide drivers with more information about their individual ratings and how they compare with their peers.
The company will also introduce a policy explaining the circumstances under which it deactivates drivers in these states from using the app. Drivers will not be subject to deactivation for low acceptance rates, and Uber will institute appeal panels, made up of highly rated drivers, for drivers who believe they have been unjustly terminated.
Additionally, a driver’s association will be created for both states. Uber will help fund these two associations and meet with them quarterly to discuss the drivers’ issues.
Drivers will be permitted to put signs in their cars stating that “tips are not included, they are not required, but they would be appreciated.”
“We realize that some will be disappointed not to see this case go to trial in June,” Shannon Liss-Riordan, the attorney representing the drivers, said in a statement. “We were looking forward to this trial. But we believe the settlement we have been able to negotiate for Uber drivers throughout California and Massachusetts provides significant benefits — both monetary and non-monetary — that will improve the work lives of the drivers and justifies this compromise result (which will not result in the drivers being reclassified).”
The case covered about 350,000 drivers.
However, the Uber settlement still needs approval from the court. Recently, a $12.5 million settlement between rival ride-sharing firm Lyft and drivers who claimed independent contractor misclassification was rejected by a judge.
Separately, the Pennsylvania Public Utility Commission Thursday finalized more than $11 million in penalties against Uber Technologies Inc. and its Pennsylvania subsidiaries for operating without Commission authority from February to August 2014 and for failure to respond to discovery requests, resolving a formal complaint filed by the PUC’s independent Bureau of Investigation of Enforcement.
The civil penalty of $11,364,736 reduces a civil penalty of $49.9 million issued in an initial decision in November 2015.
Uber alleges this is by far the highest ever penalty issued by the Pennsylvania PUC, and that Lyft settled a case for the same issues for only $250,000.
“We are disappointed by today’s decision and shocked by the amount of the civil penalty, which is 45 times higher than the penalty paid by Uber’s competitor for the same activity,” an Uber spokesperson said in a statement. “As two commissioners confirmed today, there was no actual harm to Pennsylvanians, and the Commission subsequently approved the same operations. We look forward to making our case to the Commonwealth Court. In the meantime, we will continue to work in good faith with the Commission.”