By: Allan M. Siegel
Uber, the maker of the popular ride-hailing app, recently settled a pair
of lawsuits in Massachusetts and California that challenged the San Francisco-based
company’s legal classification of drivers. Under the settlement,
Uber will pay up to $100 million to drivers in Massachusetts and California
and provide drivers who have been deactivated from the app a greater degree
of recourse. Drivers will also be allowed to put a sign in their vehicle
that states “tips are not included” – a practice that
was previously banned. The settlement payout translates to about $200
each for the approximately 385,000 drivers represented in the claims.
The plaintiff drivers sued Uber, alleging that the company misclassifies
them as independent contractors and not employees, an illegal practice
that saves corporations large amounts of money because contractors are
entitled to fewer labor law protections. The pending settlement allows
Uber to avoid a trial on this critical question of how it classifies drivers.
Under its current business practices, Uber treats drivers as independent
contractors, not employees. The distinction is significant because it
means drivers are not covered by some tax and legal liabilities. It also
means Uber can scrimp on pay and does not have to pay benefits to drivers.
Independent contractors do not enjoy protections like minimum wage, workers’
compensation, union rights, and some antidiscrimination laws.
Even though the Massachusetts and California cases settled, lawsuits have
been filed against Uber in Florida and Illinois making similar allegations.
The suits seek to recover Uber drivers’ unpaid overtime wages and
employment-related costs. The Florida and Illinois claims seek to establish
a nationwide class action suit, but excludes Massachusetts and California
due to the pending settlement.