Uber Settles Class-Action Suits with California, Massachusetts Drivers

Uber has reached a tentative settlement in two sprawling class-action federal lawsuits brought by drivers in California and Massachusetts for as much as $100 million, agreeing to make "significant changes" that the drivers' attorney says will result in improved work lives.

Boston-based labor attorney Shannon Liss-Riordan, who represents the drivers, called the settlement historic. The lawsuits hinged on whether drivers were misclassified as independent contractors, instead of employees.

In a blog post titled "Growing and growing up," Uber CEO Travis Kalanick announced the settlement and admitted the company hasn't "always done a good job working with drivers."

Under the terms, drivers will remain independent contractors -- a big win for Uber, if the settlement stands -- but can no longer be dismissed at will. As the motion for settlement filed Thursday (and embedded below) explains:

"Uber will only be able to deactivate drivers from the Uber platform for sufficient cause, and drivers will be provided with at least two warnings prior to many types of deactivations, a written explanation of the reasons for any deactivation, and an appeals process overseen by fellow drivers for certain types of deactivations. Should a driver not be satisfied with the result of the appeals process, the driver may arbitrate her claim at Uber’s expense."

"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," Liss-Riordan said in a written statement.

Kalanick announced that Uber was publishing a new deactivation policy in multiple languages.

"As we’ve grown we’ve gotten a lot right, but certainly not everything," Kalanick wrote. "This new deactivation policy is an important step forward when it comes to working with drivers."

Uber has also agreed to fund and oversee the formation of a driver association which will have leaders elected by Uber drivers "who will engage in good faith discussions about issues of concerns to drivers," according to Liss-Riordan.

Uber will also make it clear to riders, Liss-Riordan wrote, that tips aren't part of the fares but "would be appreciated."

The San Francisco case had been set to go to trial in June, but plaintiffs faced a number of risks, according to Liss-Riordan, including that a jury in the city "where Uber is everywhere and quite popular" may not side with drivers.

"If we had not settled, there were some serious risks that all we have fought for -- and have achieved -- could be taken away," she wrote.

Uber agreed to pay $84 million, and another $16 million if Uber goes public and its December 2015 valuation increases by one-and-a-half times within a year of the IPO.

The settlement covers approximately 385,000 drivers in California and Massachusetts. Drivers who have the most miles driven with passengers would receive the largest settlement amounts, Liss-Riordan wrote. Depending on how many drivers participate in the settlement, court documents say, some California drivers could get as much as $8,000.

The agreement, reached with an arbitrator over three days in March and April, must still be approved by U.S. District Court Judge Edward Chen. A hearing is set for June 2 in San Francisco federal court.

Both suits had the potential to shatter Uber's business model because recognizing drivers as employees would have substantially increased the company's costs.

A San Francisco-based federal judge rejected a similar settlement involving Uber competitor Lyft earlier this month, ruling that the settlement "short-changed" drivers.

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