Uber Technologies Inc. will pay $20 million to settle California lawsuits which challenge the company’s classification of drivers as independent contractors, and not employee, therefore owing the benefits of traditional employment.
The settlement of the long-standing fight over benefits and pay comes as Uber is preparing for its initial public offering which is being scheduled for later this year.
Drivers for the ride-sharing app focused on the company’s business model of treating them as contractors rather than employees to avoid the costs of paying a minimum wage, overtime, sick leave and health insurance.
As reported by the Boston Globe, the cases turned on whether drivers were essentially forced by their contracts to resolve any conflicts one-on-one, behind the closed doors of private arbitration and forbidden to join forces in class-action lawsuits.
The central lawsuit initially had as many as 385,000 Uber drivers in California and Massachusetts pursue the class action lawsuit after a San Francisco judge granted them status to do so, but the controversial Silicon Valley firm appealed and the decision was overturned with a judge upholding Uber’s arbitration agreements stating them to be largely valid and enforceable.
That victory for Uber and it's lawyers reduced the class to about 13,600 drivers who will now partake in the final settlement.
The settlement was filed late Monday March 11, and still requires a judge’s approval.