The ride-hailing giant says it isn't a taxi company. Instead, it's a neutral technology platform that connects drivers and riders. And its drivers aren't employees but independent contractors, free to work when they want and even for multiple competitors simultaneously, Uber argues.
That difference is worth billions of dollars. Skirting labor law means Uber doesn't have to pay minimum wage, a huge windfall that keeps costs for the company low. By not treating drivers as employees, Uber saves an estimated $4.1 billion a year avoiding costs like payroll taxes, workers' compensation and reimbursing drivers for the costs of driving.
Uber settled a class action lawsuit for up to $100 million on Thursday, keeping its drivers classified as independent contractors.
The proposed 153-page settlement, which a judge must now approve, is a victory for the company. That's despite the requirement for the ride-hailing titan to pay $84 million to "all Drivers in California and Massachusetts who have used the Uber App at any time since August 16, 2009," until the date when a court agrees to the settlement.
But crucially, the legal deal leaves the outcome of several similar class action lawsuits across the country open. Uber faces action lawsuits from its drivers in Arizona, Pennsylvania, Florida, New York, Maryland, and Ohio.
“The case is being settled -- not decided.”
"The case is being settled -- not decided," said Boston-based labor lawyer Shannon Liss-Riordan, who is representing the drivers, in a statement. "No court has decided here whether Uber drivers are employees or independent contractors and that debate will not end here."
The settlement for drivers in California and Massachusetts is unlikely to directly impact class-action suits in Arizona, Florida, and Pennsylvania because they make their own labor laws around who qualifies as a contractor or an employee.
An Uber spokesman would not comment on pending lawsuits. Liss-Riordan declined to comment beyond her statement on Friday.
Uber told The Huffington Post it has no estimate for how much it would cost to reclassify its drivers as employees due to differences in how frequently drivers currently use the service. The company said 60 percent of its drivers work fewer than 10 hours a week.
While the cash portion of Thursday's settlement applies only to drivers in California and Massachusetts, other aspects of the agreement would apply to drivers across the country.
Uber has agreed to stop deactivating drivers without explanation or recourse, and will set up a "'drivers' association" that "can play a role similar to a union," Liss-Riordan said in her statement. Drivers would be allowed to solicit tips from passengers.
"We believe these to be very significant changes that will improve work conditions for Uber drivers," Liss-Riordan added in the statement. "While this case has been pending, we have heard many complaints from drivers about being deactivated without good cause and frustrations about pay issues that they have not been able to get addressed by Uber management."