Judge throws out Uber's settlement with drivers

As in the Lyft class-action lawsuit, the settlement is not seen as sufficiently fair to plaintiffs

I’m having ridesharing lawsuit settlement déjà vu.

U.S. District Judge Edward Chen, the judge presiding over a class-action lawsuit brought by drivers against Uber, has rejected the $100 million settlement announced by Uber this past April, according to Reuters.

In case you lost track, the settlement pertained to the lawsuit in which 385,000 Uber drivers (in California and Massachusetts) objected to their classification as “independent contractors” and argued that they deserved reimbursement for various expenses related to their work, including fuel and car maintenance.

Uber’s entire business model (for now) relies on its ability to quickly and easily recruit large numbers of independent workers as drivers. Otherwise, it would be nothing more than a taxi company with a nice app.

While Uber would have had to pay out $100 million in the original settlement, that’s just a drop in the bucket compared to the company’s multibillion-dollar war chest. And the settlement would have cemented the drivers as independent contractors, not employees.

In addition to the payment, however, Uber also agreed as part of the settlement to a few additional changes, including updates policies to give drivers greater transparency about their individual rating and how to remain in good standing with the company. Even more importantly, Uber updated its tipping policy from being one that outright discourage tipping to read: “riders are free to offer tips and drivers are welcome to accept them.”

But Uber made no plans to mimic Lyft by baking tipping functionality directly into the app. If you want to tip an Uber driver, you pretty much have to carry cash. For that reason, Judge Chen found the settlement deal unfair and inadequate in ensuring that Uber drivers would see an increased income from their work.

I’ve reached out to Uber to see if they have a comment on these developments, and will update when I hear back.

As mentioned above, I’m having déjà vu because something similar happened to Lyft back in April. Earlier this year, Lyft had agreed to a settlement with drivers who had been challenging their employment status. Ultimately, the company agreed to pay over $12 million in damages to drivers, who would continue to be classified as independent contractors. But in April, U.S. District Judge Vince Chhabria threw out the settlement for being unfair to the plaintiffs.

Now, 163,000 individuals that currently or formerly drove for Lyft can decide whether to accept their share of the settlement, object to it, or simply opt out. Chhabria will preside over the final settlement hearing.