Uber will pay up to 100 million dollars to its drivers in California and Massachusetts for the ride-hailing service to keep them as independent contractors.
Uber’s drivers have filed a lawsuit against the company, as they want to be recognized as employees, posing a real threat to the company’s business, and to be given benefits according to their status, such as receiving reimbursement for expenses, including money for gas and for vehicle maintenance. The suit has also challenged Uber’s practice of not allowing its drivers to receive tips from users, with the case initially being set to begin trial on June 20. However, the ride-hailing service announced it has made a settlement worth 100 million dollars to keep its divers classified as independent contractors.
Uber will have to pay 84 million dollars to the plaintiffs, with a second payment of 16 million dollars to be made only if the company goes public and its value increases one and a half times from its December 2015 financing valuation within the first year of any initial public offering. Uber was valued at 62.5 billion dollars in that December funding round, and over 450,000 US drivers currently use the app each month, chief executive Travis Kalanick said in a blog post.
As part of the settlement, Uber has agreed not to deactivate drivers who regularly decline trips when they are logged into the app and to warn them several times prior to their removal from the platform. At the same time, it will be made clear to riders that tips are not included and drivers will be permitted to put small signs in their cars stating that “tips are not included, they are not required, but they would be appreciated.” The company also has to help create a drivers’ association in both states.