Uber proposes $20M settlement of driver classification lawsuit

After a judge rejected an earlier offer, the ride-hailing company tries again. Its goal is to ensure drivers remain independent contractors, not employees.

Dara Kerr Former senior reporter
Dara Kerr was a senior reporter for CNET covering the on-demand economy and tech culture. She grew up in Colorado, went to school in New York City and can never remember how to pronounce gif.
Dara Kerr
3 min read
Uber app icon on a smartphone
Sarah Tew/CNET

Uber has offered to pay $20 million to settle a lawsuit brought by its drivers, according to court documents filed late Monday night. If the judge in the case accepts the proposal, the settlement would bring to a close one of the company's longest running court battles. It would also maintain Uber's current classification of its drivers as independent contractors (instead of employees).

The ride-hailing company is expected to have an initial public offering this year and has been working to settle many of its legal disputes over the past few months. Resolving these matters -- and keeping its current business model with drivers classified as contractors -- would help Uber look less risky to potential investors. 

"Uber has changed a lot since 2013," an Uber spokesman said in an email. "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."

This is the company's second attempt to settle the lawsuit, which was first brought against it in 2013 by drivers in California and Massachusetts. Uber's first offer to settle was in 2016, for $100 million, but US District Judge Edward Chen rejected that proposal as unfair, inadequate and unreasonable. 

Uber's current classification of drivers as contractors, sometimes referred to as gig-workers, means it's not responsible for costs including Social Security, health insurance, paid sick days and overtime. Drivers also supply and maintain their own cars, so Uber doesn't pay for gas, repairs and other related expenses. Drivers in the lawsuit say they prefer to be classified as employees because under the contractor model they often earn subpar wages.  

"We are pleased to have reached this settlement on behalf of the relatively small number of Uber drivers from California and Massachusetts who are not covered by an arbitration clause," Shannon Liss-Riordan, the attorney representing the drivers, said in an email. "Under this settlement, we estimate these drivers will receive approximately 37 cents per mile for the miles they have driven for Uber."

Along with the monetary compensation, Uber also agreed to modify some of its business practices in California and Massachusetts. These changes include warning drivers before their accounts are deactivated and creating a formal appeal process for deactivated drivers who qualify. Judge Chen still has to accept Uber's new settlement offer before it goes into effect.

Liss-Riordan has several other pending lawsuits regarding worker classification at tech companies, including at Amazon, GrubHub, Lyft, DoorDash, Postmates and Handy.

"This is not the end of the issue of driver classification," Liss-Riordan said. "We are continuing to pursue many cases against gig economy companies (and others) that are misclassifying their workers as independent contractors in order to save on labor costs and shift the risks and expenses of operating a business to their low wage workers." 

Originally published March 12, 10:36 a.m. PT. 
Updates, 12:23 p.m.: Adds comment from Uber spokesman; 1:29 p.m.: Adds additional background information; 5:19 p.m.: Clarifies that the settlement will maintain Uber's current driver classification as contractors but isn't a definitive decision on the issue.