Uber, the massively popular ridesharing company, has agreed to settle two large class action lawsuits based in California and Massachusetts. The lawsuits centered around whether the company’s drivers should be considered full-time employees or independent contractors.
In California, Uber agreed to settle the claims of approximately 385,000 drivers for a total of $84 million. If the company goes public and its value increases, it will owe the drivers an additional $16 million.
These class action lawsuits began in 2013 and quickly became the largest cases against the company. The drivers argued that they worked full time, but had none of the benefits of full-time employees. The drivers were (and are still) required to pay their own taxes, receive no paid time off, no health insurance or sick leave, and cannot take advantage of the protections of state labor laws. In addition, the drivers argued that Uber controlled too much of their business activity to legally justify their classification as independent contractors.
In response, Uber fired back by arguing that its drivers were free to work whenever they wanted for as long as they wanted. Because the drivers had the ability to create their own schedules and control their own hours, Uber argued that the drivers fit squarely within the definition of an independent contractor.
Additionally, Uber pointed to evidence showing that the drivers themselves are divided about their classification. Some drivers work full time for Uber, and want to take advantage of benefits like health insurance and overtime pay. However, many others enjoy working for Uber on their own schedule, and would quit if they were forced to work scheduled hours.
As a compromise, Uber agreed to both settle the claims in the existing class action lawsuits and to make some concessions about how its drivers are treated. The company will with drivers to create a drivers’ association in California and Massachusetts, and has agreed to be more transparent in the way that the company hires and fires its drivers.
It is important to note that Uber settled the lawsuit, and the court did not officially decide how Uber drivers or other rideshare drivers should be classified. This means that the drivers will continue to be work as independent contractors in the future, and that there is a possibility that these issues could be raised again in subsequent lawsuits.
Employers who misclassify employees as independent contractors can be liable for thousands of dollars in fines, costs, and damages. Contact Labor Law Office today to speak with an experienced wage attorney in Sacramento.
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