Employment Law Daily Uber ups the ante; will $100M proposed settlement pass muster?
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Tuesday, April 26, 2016

Uber ups the ante; will $100M proposed settlement pass muster?

By Joy P. Waltemath, J.D. Just weeks after a federal district judge for Northern California denied preliminary approval to a $12M class action settlement to resolve Lyft drivers’ misclassification claims—because the settlement was based on an “artificially low estimate” of damages (Cotter v. Lyft, Inc.)—Uber has said it will pay up to $100M to drivers in California and Massachusetts to settle their Rule 23 class actions, also based fundamentally on charges it misclassified its drivers as independent contractors. Notably, however, the proposed settlement agreement maintains the drivers’ status as independent contractors, the same approach taken by plaintiffs’ counsel Shannon Liss-Riordan in both the Lyft and Uber proposed settlements. What’s the deal? According to documents filed late April 21, the proposed settlement agreement involves two class actions: O’Connor v. Uber Technologies, Inc., No. CV 13-03826-EMC, and Massachusetts drivers covered by Yucesoy v. Uber Technologies, Inc., No. 3:15-00262-EMC (N.D. Cal.). It will also cover drivers who were excluded from the certified class in O’Connor (and whose claims are asserted in Colopy v. Uber Technologies, Inc., CGC-16-549696 (San Francisco Sup. Ct.). The motion for approval states the settlement has two primary components: a non-reversionary payment in the amount of $100M ($84M of that amount is guaranteed and payment of the remaining $16M is “contingent on a future increase of Uber’s valuation” pursuant to an IPO of Uber), plus non-monetary relief that includes numerous changes to Uber’s business practices. $1M will be set aside for the Private Attorneys General Act claim, of which $750,000 will be paid to the State of California, and $250,000 will be included in the gross settlement fund for California drivers. “Deactivation for cause.” As for the non-monetary relief, under the agreement Uber will only be able to deactivate drivers from the Uber platform for sufficient cause. Drivers will be provided with at least two warnings prior to many types of deactivations (except for reasons of safety, fraud, discrimination, or illegal conduct), a written explanation of the reasons for any deactivation, and an appeals process overseen by fellow drivers for certain types of deactivations. A low acceptance rate will not be grounds for deactivation, the agreement states. Should a driver not be satisfied with the result of the appeals process, the driver may arbitrate her claim at Uber’s expense (and Uber will also pay all arbitration fees for arbitrations of certain other disputes as well, including claims stemming from an alleged employment relationship with Uber), the agreement stipulates. “Driver association.” Uber will fund and facilitate the creation of a Driver Association, comprised of elected driver leaders who can create a dialogue for further programmatic relief that comes from the drivers themselves; Uber has agreed to meet quarterly with the elected leaders of this association to discuss and, in good faith, try to address driver concerns, the settlement agreement suggests. The Driver Association will not be a union and it will have no right or capacity to bargain collectively. (This type of apparently employer-dominated “meet and confer” association potentially could be considered unlawful under the National Labor Relations Act Section 8(a)(2), but in any event, because the proposed agreement retains the drivers’ classification as independent contractors rather than employees, the NLRA would not apply.) Tips. As part of this proposed settlement, Uber has agreed to make good faith efforts to clarify its messaging regarding tipping, clarifying on its website and in communications with drivers and riders that tips are not included on Uber's platforms (with the exception of UberTAXI) and that tipping is neither expected nor required. Uber has confirmed that its policies do not prohibit a driver from putting up signs or requesting a tip. Under this agreement, Uber will not have the ability to deactivate drivers at will in California and Massachusetts, so there would be no prohibition on drivers posting in their cars a small sign stating that “tips are not included, they are not expected, but they would be appreciated,” the agreement notes. Nonmonetary relief not permanent. The settlement agreement states that the provisions addressing the nonmonetary relief “shall expire upon the earliest of the following two dates: (i) two years after Final Approval; or (ii) the date upon which there are changes to any applicable statute, regulation, or other law that Uber reasonably believes would require a modification to any of the provisions of the agreement … to comply with the applicable statute, regulation, or law.” The plaintiffs say they decided to accept the settlement fully cognizant of the benefits and risks of proceeding to trial, including risks posed by the Ninth Circuit’s imminent review of the enforceability of Uber’s arbitration clauses and class certification, and the possibility of an adverse jury verdict. While the agreement does not require Uber to reclassify drivers as employees, “it will provide significant benefits and added protections to drivers that they do not currently have, require significant changes to Uber’s business practices, and provide substantial monetary relief, which will be proportional to the strength of class members’ potential claims,” the plaintiffs note. “Growing and growing up.” A blog post by Uber CEO Travis Kalanick on April 21 also announced the proposed deal, noting “The key issue at stake in both cases is whether drivers using the Uber app should be classified as independent contractors or employees. 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.” Kalanick went on to note that Uber drivers value their independence and freedom, and “choose Uber because they want to be their own boss.” In addition to praising the settlement’s recognition that drivers should remain independent contractors, the CEO added: “Uber is a new way of working: it’s about people having the freedom to start and stop work when they want, at the push of a button.”

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