Uber Wins: Settles Suit, Dodges Trial, Drivers Remain Contractors

It seems San Francisco-based Uber has weaseled its way out of being a responsible capitalist yet again, even if CEO Travis Kalanick's $62 billion company might be pretending it just lost big. 

Late Thursday, the gig economy darling announced an $84 million settlement in class-action lawsuits in California and Massachusetts brought by drivers for the ride-hail app company. (Most reports say $100 million, but there’s a catch.) Drivers had sought to change their classification with Uber from independent contractors to full-fledged employees. Such a move would give them more employee protections, such as ensuring they receive at least minimum wage and that Uber would pay the employers’ share of Social Security.

It would also cost Uber a ton of money in new payroll taxes, which is why the company has fought it so hard.

Instead, the 385,000 drivers covered in the settlement stand to net $218 apiece (it could reach as much as $259 per person if Uber ever goes public). And they will be given more info about their driver rating, will not be deactivated as a driver without a thorough explanation, and “associations” representing drivers in California and Massachusetts (the two states where drivers sued) will be created at Uber’s expense. That last part sounds like a way to stem the flow of calls for unionization, which would really sting Uber.

[jump] Attorney Shannon Liss-Riordan, who represented the drivers, released a statement full of spin, trying to paint the result as a positive for drivers even though it’s clearly only benefiting Uber at this time.

“Importantly, the case is being settled — not decided,” the statement said. “This case, however, with this significant payment of money, and attention that has been drawn to this issue, stands as a stern warning to companies who play fast and loose with classifying their work force as independent contractors.”

Liss-Riordan is right that this is not a decision handed down by a judge — and, like a recent ruling in a similar class-action lawsuit settlement between Lyft and its drivers, a judge could reject the deal — so the quest for employee status is not over. But where’s this “stern warning” she describes? If anything, Uber is giving the stern warning: Stop messing with us, we are bigger and more valuable than you think. All Uber has to do is provide drivers with a little more data and possibly pay out what for it is not really a big sum of money (remember, in December the company was valued at more than $60 billion). So Uber won — and won big.

“Today, while the number of drivers using our app has grown dramatically, their reasons for doing so haven’t changed,” wrote Uber CEO and co-founder Travis Kalanick in a company blog post addressing the settlement.

“In the U.S. almost 90 percent say they choose Uber because they want to be their own boss. 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,” he wrote. “That’s why we are so pleased that this settlement recognizes that drivers should remain as independent contractors, not employees.”

Bingo, Travis. The problem is, even if Uber is right that 90 percent of its drivers want flexibility, it stands to reason that 10 percent want more security. In the same blog post, Kalanick reveals that “over 450,000 drivers use the app each month here in the U.S.” That means 45,000 drivers are using the app as a full-time means of income, according to Kalanick’s math. Why should those drivers suffer so Uber can cash fatter checks?

“It’s incredibly important that when people use Uber, they have a great experience—one that is safe, reliable, convenient and a good value,” Kalanick’s blog says. “Otherwise, fewer passengers will use the app over time, which is bad for everyone.”

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