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Ride-hailing company Uber Technologies Inc. agreed to pay $20 million to a class of drivers in a proposed settlement agreement Monday that could end more than five years of litigation over how the company classifies its drivers.

Uber drivers are considered independent contractors, rather than employees with traditional benefits like minimum wage, overtime and sick pay. But a slew of plaintiffs took issue with this, arguing the company was violating labor law to skirt costs by denying them benefits.

Uber's lawyer Theodore J. Boutrous Jr. of Gibson, Dunn & Crutcher in Los Angeles did not respond to requests for comment before deadline, but the company has denied misclassifying its drivers. Its former CEO Travis Kalanick, whom the plaintiffs sued individually while he was still at the helm, was also part of the tentative agreement awaiting U.S. District Judge Edward Chen's approval.

Uber spokesperson Nick Smith applauded the settlement, saying, “Uber has changed a lot since 2013. We have made the driver experience even better through improvements like in-app tipping, a redesigned driver app and new rewards programs like Uber Pro. We're pleased to reach a settlement on this matter and we'll continue working hard to improve the quality, security and dignity of independent work.”

A hearing on the proposed settlement is scheduled for 1:30 p.m. March 21 before Chen in the Northern District of California.

Plaintiffs class action lawyer Shannon Liss-Riordan of Lichten & Liss-Riordan in Boston is also claiming $5 million in attorney fees for her team. According to the agreement, Liss-Riordan spent 4,500 hours on the case, and her $850-an-hour billing rate totaled more than $3 million.

Under the settlement, Uber drivers clinched another provision: The company will no longer deactivate their accounts if they don't accept enough rides. It will also implement a formal appeals process for those already deactivated, unless they've been dropped for certain reasons, including criminal activity, discrimination, sexual misconduct or safety concerns.

The agreement was aimed at clarifying the deactivation process for drivers, as many felt they could be fired at a moment's notice under rules that were unclear, according to Liss-Riordan.

“I think it's been a little inconsistent, and a lot of drivers have expressed to us their concerns about hearing it out of the blue, and not knowing what they did and not being able to get their head around what happened,” Liss-Riordan said. “This could add some process to it and some transparency.”

Uber also pledged to keep its online policy simple and easy to access, giving drivers advance notice before their accounts are deactivated, and said it will offer “quality courses” to deactivated drivers, who can be considered for reinstatement after completing a course.

Liss-Riordan hopes the settlement could eventually affect the way similar companies write their policies.

“I feel like every case that we do pushes the ball forward a little more, and I know that companies are watching what happens with other companies,” she said.

 

Read the full settlement agreement:

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'It's Too Bad'

This isn't the first settlement proposal the parties have reached. In 2016, Uber agreed to pay $100 million to 385,000 drivers, but the court rejected the plan.

Then came a September 2018 U.S. Court of Appeals for the Ninth Circuit ruling that branded Uber's arbitration clauses enforceable. It meant drivers had to individually arbitrate their claims, but left 13,600 drivers in California and Massachusetts still eligible to sue. According to the agreement, the remaining 13,600 aren't covered by an arbitration clause as they opted out or left no record of acceptance.

Now, fewer drivers will receive larger shares each—about 37 cents per mile driven, according to Liss-Riordan.

While Liss-Riordan said she's happy for the drivers who managed to settle, she's concerned about the ones who couldn't, thanks to the courts' widespread acceptance of arbitration clauses.

“It's too bad that it's just a small slice of the workers we think Uber has violated their rights,”  Liss-Riordan said. “Arbitration clauses make it much more difficult for workers to vindicate their rights under the law, and I think that's a big problem. I think the pendulum might start swinging back because I think the companies really took this too far.”

Uber has consistently argued it has every right to enforce arbitration clauses.

 

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