Employment Law Daily Proposed $1.3M settlement of FLSA claims by 5200 Uber drivers approved
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Wednesday, January 9, 2019

Proposed $1.3M settlement of FLSA claims by 5200 Uber drivers approved

By Nicole D. Prysby, J.D.

A federal district court in North Carolina has approved a proposed settlement agreement in a collective action involving FLSA claims made by 5,200 Uber drivers who alleged they were misclassified as independent contractors. The proposed agreement has a maximum gross settlement amount of $1,304,250, of which 56.3 percent will go to class plaintiffs. The average recovery for class members is about $140. The court determined that the named plaintiff and class counsel have authority to settle the case on behalf of the opt-in class and that the settlement is fair and reasonable. Because the class members signed a consent form in which they agreed to be represented by class counsel and agreed to be bound by any adjudication or ruling of the court, class counsel had apparent authority to execute the settlement. Uber offered a vigorous defense and prevailed on the issue in another court, for a similar group of drivers. Therefore, the plaintiffs demonstrated that Uber had a significant chance of prevailing on the merits or achieving a reduction in liability, should the case go to trial (Hood v. Uber Technologies, Inc., January 3, 2019, Eagles, C.).

An Uber driver brought a putative class action against the company, alleging FLSA violations for misclassifying drivers as independent contractors. In 2017, the court granted conditional class certification for persons who worked as Uber drivers anywhere in the United States and opted out of arbitration. Approximately 5200 class members opted in. Uber gathered information on each class member’s work with Uber and provided it to class counsel before the mediation, which allowed counsel to calculate individual damages for the nonpayment of overtime and under a variety of scenarios.

Terms of settlement agreement. Under the agreement, Uber will pay a maximum gross settlement amount of $1,304,250. Of that total, $734,294 (56.3 percent) would go to class plaintiffs that have opted in, $434,750 (33 percent) would be paid in attorneys’ fees, and $90,205 (6.9 percent) would go towards litigation expenses. Of the remaining 3.5 percent, the parties agreed that $5,000 would compensate the named plaintiff for his assistance to the case and $40,000 would compensate the settlement administrator. Each class member will receive a payment based on the hours worked and expenses incurred. The amounts range from $50 to almost $5,000, and the average recovery for class members is about $140.

Approval. The court determined that the named plaintiff and class counsel have authority to settle the case on behalf of the opt-in class and that the settlement is fair and reasonable. Although the consent form signed by class members did not explicitly authorize settlement of the case on their behalf, the signing class members did agree that class counsel would represent them and that they would “be bound by any adjudication or ruling of the Court, whether favorable or unfavorable.” The notice to class members explicitly mentioned settlement three times and twice informed class members that if they elected to join the lawsuit, they would be “bound by any settlement.” Nothing in the class notice or the consent form indicated that counsel would consult with class members before settlement. Because the class members signed a consent form in which they agreed to be represented by class counsel and agreed to be bound by any adjudication or ruling of the court, class counsel had apparent authority to execute the settlement.

The settlement is a fair and reasonable resolution of a bona fide FLSA dispute. The drivers contended Uber misclassified them as independent contractors and that they were instead employees entitled to minimum wage and overtime. Uber offered a vigorous defense and prevailed on the issue in another court, for a similar group of drivers. Therefore, the plaintiffs demonstrated that Uber had a significant chance of prevailing on the merits or achieving a reduction in liability, should the case go to trial. Formal discovery did not occur, but the parties did exchange a 322,215-line spreadsheet with weekly hourly data for class members. The parties would likely incur substantial costs by engaging in discovery for the 5,200 drivers who have opted in, by litigating motions for summary judgment, and by trying the case. Settlement is thus appropriate at this stage in the proceedings, the court determined. The parties used the services of a mediator to reach the agreement, indicating they engaged in arm’s-length negotiations.

The plaintiffs calculated a projected damages ceiling of $3,374,894. The settlement agreement provides for a maximum gross settlement amount of approximately 39 percent of this ceiling, which is a reasonable amount.

The court did express a concern over a settlement provision in which class member drivers with deactivated accounts agree not to apply to work with Uber again, as it appears contrary to the opt-in notice’s assurance that Uber would not retaliate against class members for joining the lawsuit and to the FLSA’s non-retaliation clause. However, the provision only impacts those with deactivated accounts or accounts with limited use, not those currently relying on Uber for income. And the class member drivers are receiving monetary compensation in exchange for this and other promises in the settlement agreement, so the court concluded that the provision does not undermine the purpose of the non-retaliation clause.

The settlement agreement provides that exactly one-third of the settlement amount be paid in attorneys’ fees. The fees request is significantly less than the total $965,015 in fees incurred, using the lodestar method. Applying the total proposed fee of $434,750 to the total 1,456 hours for four attorneys and a paralegal results in an average rate of approximately $300 dollars per hour. This average rate is reasonable when compared to publicly-available attorney fee tables for metropolitan areas and the overall fee award is consistent with fees previously approved by the court for FLSA claims.

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