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Friday, April 22, 2016

Uber's $84M Settlement Keeps Drivers as Contractors

Uber has announced that it’s just settled two class-action lawsuits in California and Massachusetts for a cool $84 million. And for that princely sum, Uber gets to keep its drivers as contractors, rather than employees.

The ride-hailing company will stump up $84 million as part of the settlement, which will be distributed to 385,000 drivers that were represented in the two cases. It’ll pay out a further $16 million if it “goes public and our valuation increases one and a half times from our December 2015 financing valuation within the first year of an IPO.”

The company will also: make it easier for its drivers to find and compare ratings; introduce clear policies about how and why their accounts can be deactivated (in those two states only); and help them create driver’s association.

Which is a lot of things! But in the world of purely rational calculation it must be totally, completely worth it for Uber—because by ensuring that drivers remain as contractors and not employees it avoids paying minimum wage and social security for each of its drivers.

It allows Uber to continue to move a huge chunk of financial risk away from the company and place it on the back of the worker—and, ultimately, in some cases the state. For those reasons, there’s a long and ongoing slog being fought by lawyers and labor groups to try and make Uber—and others like it—treat their workers as employees rather contractors.

Uber’s counter point, which its CEO Travis Kalanick made yet again in a blog post announcing the settlement, is that “drivers value their independence—the freedom to... drive most of the week or for just a few hours.” And the settlement does go some way to supplementing that freedom with reassurances and securities more akin to being an employee.

But ultimately, it’s in Uber’s interest to keep its drivers as contractors. And this settlement is an indication that it seems to be getting its way.

[Uber and NYT]

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