Uber Settles Class-Action Suits Up To $100 Million in Massachusetts, California

Boston, MA - Transportation giant Uber reached what could be a $100 million settlement Thursday in two class-action lawsuits with Massachusetts and California drivers.

In a lengthy blog post, Uber CEO and co-founder Travis Kalanick shared details on the settlements. In Massachusetts, the case was Yucesoy v. Uber Technologies, Inc., first filed in 2013. In both suits the question at hand was: Should Uber drivers be classified as independent contractors or employees?

According to Uber, the two sides agreed drivers will remain independent contractors, as part of the settlement.

In return, Uber will pay $84 million to the plaintiffs, with a second payment of $16 million to follow, if Uber goes public and its valuation increases. As of December, Uber was valued at $62.5 billion. At that valuation, the hefty-sounding settlement represents only a sliver of Uber's wealth.

As part of the settlement, Uber also promised greater transparency on drivers' ratings within the app. It pledged to articulate its policy more clearly when it comes to "deactivating" drivers whose ratings fall short. Uber will also create a driver's association in Massachusetts and California, contributing funding to both and meeting quarterly with them to discuss driver issues.

In his post, Kalanick cast the long-simmering issues as a byproduct of the company's dramatic growth.

"Uber is a new way of working," he wrote. "It’s about people having the freedom to start and stop work when they want, at the push of a button. As we’ve grown we’ve gotten a lot right—but certainly not everything."

With a clearly articulated policy that includes leniency for drivers who repeatedly decline rides, Uber distances itself from the image of an employer, hiring and firing at will. That said, many critics still contend its drivers occupy a legal gray area, where they're not quite independent contractors, yet still don't receive the benefits and supports of full employment.

The case represents just one step in the ongoing evolution of what's commonly called the "gig economy," which extends from Uber to competitor Lyft, and beyond. There are multiple other legal efforts against Uber underway, which in time will continue to sketch out the legal boundaries for Uber and its fellow gig-based startups.