Uber Settlement: Drivers Are a Bit Richer, but Still Contractors

By Casey C. Sullivan, Esq. on April 22, 2016 | Last updated on March 21, 2019

We have to say it: we're a little disappointed in the Uber settlement -- and not because it doesn't give drivers enough cash, or because we'd rather not tip. The settlement means that one of the biggest questions of the modern "gig economy" goes unanswered. We still don't know: are the thousands of on-demand workers, at companies like Uber, Lyft, and Postmates, employees or independent contractors?

Uber announced yesterday that it was settling two massive class actions brought by its drivers. As part of the settlement, Uber will pay $100 million and allow drivers to solicit tips from passengers, but those same drivers will continue to be considered independent contractors by the company.

$100 Million for Drivers

Uber had been facing two massive class action suits from current and former drivers, one in California and one in Massachusetts. The California suit had already grown to include nearly a quarter of a million Uber drivers and was set for trial in late June. If Uber's settlement is approved, that trial will never happen.

Under the terms of the settlement, Uber will pay out $84 million to California and Massachusetts drivers who have used the app since August 16th, 2009. The company will throw in an additional $16 million if it goes public or is acquired. Uber will also allow drivers to accept tips, but those drivers will not be considered employees of the company.

(Shannon Liss-Riordan, the attorney who has filed a host of employee classification suits against tech companies comes out well herself, getting a quarter of the settlement.)

The settlement is already being hailed as a model for other tech and "sharing economy" companies. Fortune says that it could "set a template for Uber in other states, and for competing ride-hailing services like Lyft," while Bloomberg declares that the settlement could set the pace for the gig economy.

Contractor or Employee? We May Never Know. (We Will Know.)

The drivers' lawsuit was one of the most visible threats to Uber's business model. Had the company been forced to treat drivers as employees, it would face significantly higher labor and benefits costs. If approved, the settlement could resolve that issue before any courts weigh in.

But, the question of whether gig economy workers are contractors or employees is hardly settled. As Liss-Riordan announced, "No court has decided here whether Uber drivers are employees or independent contractors and that debate will not end here."

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