Uber’s $100M Class Action Settlement for Drivers Rejected by Judge

Distracted Driver looking at cell phone

The long-running class action case brought by Uber drivers in California and Massachusetts against Uber will apparently keep on running at least a little longer, as the US district court judge overseeing the litigation in San Francisco has rejected a proposed $100 million settlement between the drivers and the company. The class action, which hinges on the distinction between company employees and independent contractors and the benefits that are afforded such parties based on that distinction, should have wide-ranging effects on newer tech-based companies that rely on the independent contractor model.

Why Uber Drivers Sued Uber

The plaintiff class in the Uber class action includes approximately 385,000 current and former drivers who worked for Uber. For the uninitiated, Uber is a “ride-sharing app” that provides taxi services around the world by working with drivers who collect a portion of the fee that Uber charges passengers. Uber considers its drivers independent contractors and not employees, which is an important distinction as state and federal labor laws require that employees receive certain benefits while such benefits do not have to provided to independent contractors. In the class action, the drivers argue that Uber intentionally misclassified them as independent contractors to avoid paying benefits, and that the drivers should be compensated for expenses such as maintenance and gas.

The Terms of the Proposed $100m Settlement

Under the terms of the proposed $100 million settlement with the 385,000 drivers, the drivers would have shared in the money (working out to approximately several hundred dollars per driver) in return for agreeing to remain classified as independent contractors. Notably, $16 million of that $100 million would only be paid in the event that Uber had a successful IPO and reached certain benchmarks following an IPO, meaning only $84 million was guaranteed to be paid.

The settlement also included a $1 million payment made by Uber to satisfy claims brought by the drivers under the “Private Attorney General Act” (PAGA), a California law that gives private citizens the right to pursue claims against parties that violate state law, with the proceeds being shared between the plaintiffs and the state.

Why the Judge Rejected the Settlement

Judge Edward Chen took issue with several aspects of the settlement in his determination to reject it. First off, he only considered the $84 million that was guaranteed to be paid, as the remaining $16 million was contingent on the IPO. The judge indicated he was inclined to consider the $84 million as an adequate recovery, but he took issue with the relatively small $1 million PAGA settlement, ruling that there was no indication that such a recovery was adequate considering the potential magnitude of civil fines that Uber would face if the PAGA claims actually were adjudicated by the court. Taking the view that the plaintiffs wrongly used the PAGA claim as a “bargaining chip” in favor of the class action settlement, as opposed to reaching a serious valuation of a fair and adequate PAGA settlement, the judge ordered that the proposed settlement did not fulfill the purposes of the PAGA statute and thus should be rejected.

Where the Uber Class Action Goes From Here

It will be very interesting to see where negotiations go in light of this most ruling, and whether the drivers and Uber can reach another agreement or whether they will proceed to a verdict on the merits. If the case is decided by a judge, the plaintiffs will have to prove that they are indeed employees to prevail, meaning it is possible they could recover nothing.

If you have been injured by the wrongdoing of another and think you may have a potential class action claim, take the first step in protecting your rights and contact the class action attorneys at McCune Wright Arevalo, LLP today for a free consultation.

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