Uber agrees to pay $84M, keep drivers as contractors in 2 states
SAN FRANCISCO -- Uber has settled a pair of major class-action lawsuits in California and Massachusetts that will keep its drivers independent contractors instead of employees, the company announced Thursday night.
The settlement is a major step toward the ride-hailing company keeping its current thriving business model that has been threatened as drivers have sought a more secure status and more bargaining rights.
Under the deal Uber will pay $84 million to the plaintiffs in the two states and another $16 million if the company goes public and meets certain goals.
San Francisco-based Uber also agreed to improve its systems for communicating with drivers about their ratings and why they are terminated, and to help start drivers' associations in both states.
Classifying its workers as employees could've raised Uber's operating expenses significantly and would go against its business model and identity. Uber's selling points for drivers are based on ideas of freedom and autonomy.
"Drivers value their independence -- the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours," Uber CEO Travis Kalanick said in a company blog post announcing the settlement.
Federal law does not extend collective bargaining rights to independent contractors like architects, masseuses or workers dispatched through mobile applications like Uber and Lyft.
The settlement, which involved 385,000 drivers in in the two cases, was filed in a U.S. District Court in San Francisco. A federal judge still must sign off on the deal.
Attorneys for the plaintiffs could not immediately be reached for comment.
Earlier this month, it was reported that Uber will pay at least $10 million to settle allegations by California prosecutors that it misled passengers about the quality of its driver background checks.
Prosecutors claimed the ride-hailing service made false or misleading statements about the background checks it conducts on its drivers, CBS Los Angeles reported.
"We are pleased that Uber has agreed to comply with state consumer laws," Los Angeles County District Attorney Jackie Lacey said. "With this settlement, the ride-sharing company has pledged to communicate honestly about its driver background checks and airport fees, important steps to protecting the residents of California."
San Francisco and Los Angeles prosecutors sued in 2014, saying Uber's background checks were inferior to what taxi drivers undergo because they did not include fingerprint checks for past convictions. Instead, Uber's process relies on a name search of other criminal databases and motor vehicle department files going back seven years.
Uber has defended the safety of its service amid a steady stream of allegations that its drivers have assaulted passengers, or, in the case of a driver in Michigan earlier this year, killed people. The app lets passengers share their location in real time, Uber points out, and the person who booked the ride is required to rate the driver after each trip, helping weed out unsavory characters.
Under the settlement, Uber agreed to pay $10 million within 60 days. If the company does not comply with the terms over the next two years, Uber would have to pay an additional $15 million, prosecutors said.
Uber did not admit wrongdoing, as is standard for such settlements, and said it already has made many changes prosecutors sought.