Why Uber drivers could still gain the upper hand in settlement deal

Reynolds Holding

Uber is getting off cheaply in its deal with disgruntled U.S. drivers. Treated as employees rather than independent contractors, the ride-hailing service might have had to pay them as much as $730 million more, according to court papers. That makes a $100 million settlement of two class-action lawsuits look like peanuts.

Uber driver looking for new passengers in Washington, D.C.
Jonathan Newton | The Washington Post | Getty Images

The new figure emerged on Monday after Judge Edward Chen released previously confidential portions of the settlement agreement, which provides that drivers will continue to be classified as contractors.

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The amount is based on the rate the U.S. government sets to reimburse drivers for each mile traveled. Add in claims for unpaid tips, and the total exceeds $850 million. Uber argued for a different mileage rate but still came up with about $430 million in potential damages.

Uber drivers, if employees, owed $730 million more: US court papers

There were plenty of risks for the plaintiffs in taking the case to trial, though. An appeals court had agreed to consider Uber's request to cut the number of California drivers involved from 240,000 to as few as 8,000.

Also pending appeal was a ruling that the drivers did not have to resolve their claims individually in private arbitration. If those had gone Uber's way, the drivers might have ended up with nothing.

What's more, the non-financial benefits of the deal are substantial. Among other things, it calls for creation of a drivers' association that can, in essence, bargain with management. That has paved the way for drivers in other states to organize.

For example, Uber on Tuesday announced an agreement allowing New York drivers to affiliate with a regional union, which could then represent them under limited circumstances.

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Yet objections to the financial settlement are growing among drivers who believe their case was solid. Uber—valued at more than $60 billion in private markets—controls how its drivers work and the operation of its service generally, strong indications that drivers are in fact legal employees. Their early victories also suggested the judge was listening.

He will now decide in the coming weeks whether to approve the agreement. If he's inclined to give Uber a hard time, the numbers offer him another reason to reject it.

Commentary by Reynolds Holding of Reuters Breakingviews.

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