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Uber Settles Driver Labor Lawsuit for $100 Million

Uber Settles Driver Labor Lawsuit for $100 Million

Yesterday, Uber settled the class action lawsuits in Massachusetts and California for approximately $100 million.  The major take away from the settlement is that all drivers will remain independent contractors and there are some minor changes to how and when they deactivate drivers. Uber is making minor changes to its relationship with drivers in order to reduce the claims against them for employee status.

Below is the summary from Uber’s press release:

As part of this settlement, which covers all classification claims involving Uber in California and Massachusetts, the two sides have agreed that:

  • Drivers will remain independent contractors, not employees;
  • Uber will pay $84 million to the plaintiffs. There will be a second payment of $16 million if Uber goes public and our valuation increases one and a half times from our December 2015 financing valuation within the first year of an IPO;
  • Uber will provide drivers with more information about their individual rating and how it compares with their peers. Uber will also introduce a policy explaining the circumstances under which we deactivate drivers in these states from using the app; and
  • We will work together to create a driver’s association in both [CA and MA] states. Uber will help fund these two associations and meet them quarterly to discuss the issues that matter most to drivers.

Driver Payouts:

At this time, the approximately 385,000 drivers will be sharing the 84 million dollar settlement. Usually 1/4 of this settlement goes to the lawyer, so the final amount split between the drivers is $63 million, with another $12 million if Uber goes public and increases to 1.5x Dec 2015 valuation. The average payout per driver is a measly $163 and this will depend on how much you drove on Uber and when you started with Uber. Drivers who were onboarded earlier and drove more will get a higher payout. The class of drivers is any driver since 2009 who signed up to drive in their own name (not through intermediate companies) in California and Massachusetts. This will include not only  UberX, UberXL, and UberSelect drivers, but also UberBlack and UberSUV who signed up to drive under their own name.

I would hazard to guess that the most active drivers will get in the range of a few thousand dollars but it wouldn’t be much more than that. I probably would be getting somewhere near $150 but it is only a guess.

Changes to Uber’s Deactivation Policy

Uber will still continue to deactivate drivers for low ratings and for excessive ride cancellations (when drivers accept then cancel the ride before pickup). However, they will stop temporarily or permanently deactivating drives for not accepting trips. Here is their statement from Uber’s press release:

As part of this settlement, Uber has agreed not to deactivate drivers who regularly decline trips when they are logged into the app.

This is different from ride cancellations. This is when you do not accept ride requests when it appears on screen. There have been many drivers who noted issues with the app that either never notifies them of a trip request or show missed trip requests on their weekly statement. Usually this doesn’t amount to much but it can cause drivers to get warnings or temporary deactivation because of excess missed trip requests.

In the past, drivers would be deactivated because they decline too many trips. Here are a few reasons why drivers would decline trip requests:

Here is the progression of warnings from Uber about excessive missed trip requests:

What most drivers don’t know is that you can easily fight the temporary deactivation. All you need to do is to send an email to Uber stating that their temporary deactivation for missed trip requests is against the Uber agreement with drivers. It is written in the agreement that we can choose which trips we accept and the wording of such stipulations have not changed since 2013. If drivers email into their local office or Uber support, they normally get re-instated within a few hours, or overnight depending on the time of day the email was sent. This type of penalty and driver response had been going on since 2014. I doubt this is necessary anymore, but it may be good to know if you do get deactivated, despite their policy not to anymore.


But what about not accepting UberPool requests? From Uber’s press release, I would assume that we are not penalized for not accepting UberPool requests (like we are no longer penalized for regular Uber trips), but Uber may be more aggressive in preventing you to sign back online again if you miss only one or two UberPool requests.

Uber Drivers and Independent Contractor Status

Some of these minor changes are giving Uber drivers more freedom and closer to independent contractor status rather than employee status. Uber will change what they need to in order to appease the courts so that they can keep the independent contractor status for their drivers. There are still some that believe that the entire deactivation policy (see below) essentially proves that Uber drivers are employees and not independent contractors. The case is settled now, which will form a precedent for the other lawsuits in Florida, Arizona and Pennsylvania. The statement made here is really that Uber drivers were and are still independent contractors. There is a small minority of drivers that would like to be employees, but a plurality of drivers would like to remain independent contractors, despite the various rules and control Uber has over us.

This settlement will have a large effect on the sharing economy. It is still not clear who is and isn’t an employee, but more lawsuits over the next few years may clarify the picture.

Uber Deactivation Policy

It is kind of crazy that it took this long for Uber to publish something like this. The delay in publishing this list until now definitely was because of the lawsuit. You can see the full version of the deactivation policy here. It is valid in the United States but they are looking to establish similar rules worldwide. Most of the information on this document is rather common knowledge among many Uber drivers.

Because of this lawsuit, they are making a minor change to their deactivation policy. They will no longer deactivate drivers (temporarily or permanently) due to acceptance rates

Here is a short summary of different reasons why Uber can deactivate drivers:






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