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Uber Settles with California, Massachusetts Drivers for up to $100 Million

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.

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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.