Who Is The Real Winner In The Uber $100 Million Class Action Settlement
While Uber just settled two major class action lawsuits that were pending in California and Massachusetts to the tune of $100 Million Dollars, the settlement does not amount to much and really does not settle anything. This was the case that was supposed to knock Uber off the high perch it has sat on since its founding in 2009. $100 Million Dollars is a lot of money, but with billions in financing, this amount is a very modest price for Uber to pay to protect its business.
The thing is, the settlement does not really settle anything. By settling these lawsuits, Uber has forestalled any precedent being set on the question of whether Uber—and others in the so called “gig economy” has a legal obligation to classify its workers as employees. A loss of a case like this would cost Uber billions of dollars, eroding its potential profitability and its supposed value.
The question of whether Uber drivers are independent contractors or employees centers largely on how much control the company exerts over them. The main difference is that if drivers are employees, then Uber has to pay drivers benefits like health insurance, paid time off as well as payroll tax and other large costs associated with benefits that employees are entitled to under the law.
The key question left unanswered by the settlement announcement is whether the drivers are receiving enough in return for what they're giving up. Nothing fundamental in the balance of income and expenses will change as a result of the deal. Uber drivers will still have to pay for gas, insurance and wear-and-tear on their vehicles, and Uber will retain the right to set fares and extract fees and commissions of more than 20%.
The settlement of these cases is a great deal for Uber because, at least for the moment, it removes what was plainly regarded as a massive threat to its business. Uber portrays the deal as a complete victory for drivers because according to Uber, drivers value their independence. This is yet another example of Uber’s press relations machine operating at full steam (blow hard steam).
The settlement agreement boils down to one thing: If a judge accepts the terms, Uber can still treat its drivers as independent contractors, in exchange for a few minor concessions that address some concerns that drivers had expressed throughout the case. The main part of the settlement that directly affects Uber riders is the company’s agreement to stop saying that the tip is included in the fare. Uber often discouraged its drivers from soliciting tips from passengers because the company argued the extra step made the experience much less seamless and thus less on-demand. But riders were never prohibited from tipping their drivers; they were just told they didn’t need to. This was done because Uber didn’t want riders to have to carry around cash. Uber’s saw its cashless, friction-free payment experience as a positive differentiator from yellow taxis. The settlement does not require Uber to add an in-app tipping feature which allows riders to add a tip to their electronic bill.
The biggest change for drivers, inside and outside of California and Massachusetts, is that they cannot be deactivated from the Uber platform for failing to accept a minimum number of ride requests. Previously, drivers would receive emails or other forms of communication warning that they would be deactivated/fired if they did not raise their acceptance rate to at least 80 percent of all ride requests.
Drivers in California and Massachusetts will see more minor changes. More specifically, certain drivers in these states will receive some money form the settlement and will have the right to a new appeals panel. Out of the $100 million settlement, $84 million is the first part of the settlement and If Uber goes public, it will have to pay $16 million more. The distribution of the money that drivers receive will be based on a number of factors, but regardless of the factors, the total amount to each driver will range from $24.00 to $8,000.00.
The most significant aspect of the settlement is that drivers in California and Massachusetts get to form an appeals panel, through which drivers can appeal the company’s decision to deactivate them, and a driver association that serves in the place of a union but will not be legally recognized as one. So while there will be a remedy when a driver believes they were wrongfully deactivated, Uber will ultimately have the final say.
In the end, the Uber settlement gives some drivers a few dollars as a one-time payout, but still leaves them working as Uber employees in all but name. Since these lawsuits had the potential to force real change, it is hard to see this as their victory. In essence, Uber just paid through the nose to buy labor peace in California and Massachusetts.
The settlement completely abandons the very point of the lawsuit. The lawyers for the Uber drivers have long framed these cases as a crusade for employee rights. They defended the settlement, saying it was the best one possible given the uncertainties of continuing to trial. Anyone is the legal profession knows that lawsuits are always risky because the outcome is always uncertain. Lawsuits are also very costly. While Uber’s attorneys were undoubtedly paid very handsomely, the attorneys for the Uber drivers (approximately 385,000 of them) have had to pay the costs of litigating these cases to date all with the risk to them of not receiving a fee for its time and efforts. The attorneys for the Uber drivers are asking the judge for a 25 percent cut of the settlement, or about $21.75 million, to cover her team’s costs.
In my opinion, it seems that the lawyers for the Uber drivers are folding their cards in return for a fat fee and promises from Uber that it will make some minor changes to its driver policy. I am sure fighting Uber is a hard and arduous undertaking, but once you take case, a lawyer is supposed to do what is in the client's best interest and not their own....and certainly not where the opponent (Uber) makes out better than all of the parties. It is as if this settlement was a clear victory for Uber.
In the end, a settlement removes the biggest threat to Uber's Business model, while Uber drivers get a bit more protection by having less stringent rules before Uber can deactivate a driver and drivers are allowed to ask for tips from passengers. BIG DEAL......This is a settlement that is fair to drivers? NO WAY. NOT IN MY BOOK. The small amount of money that will be paid to drivers in California and Massachusetts is peanuts and not worth it. This lawsuit was supposed to be about vindicating the rights of Uber drivers, but a settlement of this nature does not accomplish that goal. All this settlement does is provide a big payday for the lawyers representing the Uber drivers. Yes, they worked extremely hard over the past 2.5 years, but in the end they will get about $21.75 million in legal fees from this case. This is a huge incentive for them to settle and the impetus to convenience their clients (the drivers) that the settlement will give them more rights and will vindicate their interests.
I have the utmost respect for the plaintiffs’ attorneys as they took a case and financed it all the way, but I believe they had a great case and would have won. I have been litigating cases involving the issue of employer-employee relationship in almost every forum in New York for the past 20 years and this is one of the most clear cut cases of employer employee relationship I have ever seen. So why settle, especially before the plaintiffs’ attorney even had the chance to make a motion for summary judgment asking the court to declare Uber's drivers to be employees as a matter of law? The answer is that the plaintiffs’ attorneys worked hard, paid money from their own pockets to litigate the case and they wanted to get paid.....and now they will....BUT the real issue of whether Uber's drivers are employees or independent contractors will remain unsettled.
What a shame for the drivers, because they really don't get anything here.....and what a shame for the legal profession because now it is just another case where the lawyers settle because money has that kind of effect on people. This degrades the legal profession....and kind of makes me ashamed to be a part of it. A lawyer is supposed to zealously represent the interests of their client (not their own interests). I apologize in advance to the attorneys for the drivers, but this case has turned into just another case for them to make money. It turns out that it was not about vindicating the rights of drivers. Each driver really did not have much to lose by continuing to litigate the case, but the plaintiffs’ attorneys had millions of dollars in legal fees to lose. This appears to be simply too much for them to risk. The drivers didn't have much to risk by continuing. This is a pathetic settlement that the drivers should reject as it is their case and they should demand more.
Sometimes you have to take a risk and sometimes that risk means taking a case all the way and get a decision. Yes, it would have been a big gamble for the plaintiffs’ attorneys and they did a great job thus far, but I felt so strongly about this case that if asked, I would have worked with them for free. After 20 years of practicing law, I still believe in justice...and in this case, justice was not served. Uber continues to operate with impunity, their business model survives and the drivers go on as usual, getting treated like cattle, when in fact they are as close to an employee of Uber as any case could possibly expose. Again, Uber wins, the lawyers win and the drivers, who are the represented parties, get nothing in the long run.
In the meantime, U.S. District Judge Edward Chen may refuse to approve the settlement until it provides real benefits and lower legal fees. Everything Judge Chen has said up until this point seems to suggest that he was looking forward to a jury trial in this case. The plaintiffs in Uber's case were seeking $3.4 billion, a fairly ridiculous sum but one they thought they were owed. Judge Chen could decide that $100 million isn't enough compensation, or that the reforms Uber is promising more transparency, an ability for drivers to solicit tips and challenge deactivations through arbitration, recognition from Uber of quasi-union "driver associations" don't even scratch the surface.
Until a court decides whether Uber drivers are employees or independent contractors, the debate will not end. I guess a new set of plaintiffs in other states will have to hope for a lawyer that is willing to take the risk of taking this type of case to trial and consider more than their own self interests in being compensated for their efforts rather than the cause they were supposed to be seeking, which is justice. In this case, once again, Uber is the clear winner.