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Uber pays $3M to settle suit with New York drivers

Drivers allege the ride-hailing company misled them on how much money they could make. Uber denies the allegations but settles to avoid further legal fees.

Uber settles a lawsuit with New York drivers for $3 million.

Uber has agreed to pay $3 million to settle a lawsuit brought by thousands of New York drivers.

Drivers alleged the ride-hailing company failed to fully pay them what they believed they were due, such as overtime and tips, while charging them excessive service fees. In the settlement agreement, Uber denied the allegations but agreed to settle in order to avoid further legal expenses.

The settlement was filed Monday in federal court in Brooklyn. It still needs to be approved by US District Judge Nicholas Garaufis, the judge presiding over the case.

"The $3M settlement provides long overdue compensation to the approximately 2,400 New York drivers that opted out of the arbitration provision in the Uber driver agreement," said Philip Hines of Held & Hines LLP, the law firm representing the drivers. "The overwhelming majority of New York drivers were not able to successfully opt out of arbitration and so we are pursuing these same claims on behalf of these clients at arbitration proceedings." 

Uber didn't respond to request for comment.

The lawsuit highlights Uber's sometimes contentious relationship with the men and women who drive for the company. Uber drivers have staged protests, filed lawsuits and consistently said it's difficult to make more than the minimum wage.

Uber is one of the biggest ride-hailing services in the world with operations in 78 countries. More than 3 million people drive for Uber worldwide.

The original New York complaint, filed in December 2015, alleged that Uber and its affiliates "fraudulently structured their business model in a way that unlawfully shifts their costs of doing business." It said Uber "unlawfully" requires drivers to "assume costs associated with the tools of their trade."

This lawsuit included 2,421 New York drivers who had driven for Uber as far back as 2009. Along with saying they weren't paid the correct amount, drivers also accused the ride-hailing company of "false advertising." According to court filings, Uber claimed in bus and billboard ads that drivers could make "$5,000 guaranteed" in their first month on the job. But drivers said that wasn't the case.

"In reality, no such compensation is guaranteed and the prominent displays are made to induce drivers to sign on with Uber and… induce them to leave their employment and work for Uber," reads the settlement agreement.

This isn't the first time Uber has been accused of misleading drivers on how much they can earn. Last January, the company settled claims brought by the US Federal Trade Commission over reportedly exaggerating how much money drivers could make. Uber settled with the FTC for $20 million, which was distributed to affected drivers, along with an agreement to no longer make false, misleading or unsubstantiated statements about drivers' income.

Uber had come under fire for underpaying New York drivers before. Because of an accounting error the company admitted to, it didn't give tens of thousands of drivers their full pay for two and a half years. Uber said in May that it'd pay back all of those drivers at an average of $900 per person, which would total tens of millions of dollars.

"We are working hard to regain driver trust, and that means being transparent, sticking to our word, and making the Uber experience better from end to end," Uber's regional general manager for the US and Canada, Rachel Holt, said in a statement at the time.

First published Jan. 10, 5:36 p.m. PT.

Update, Jan. 11 at 10:14 a.m.: Adds comment from Philip Hines, a lawyer representing the Uber drivers.

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