Is paying $100M in IC settlement really a win for Uber?
In the latest chapter of two highly publicized lawsuits involving independent contractors (ICs), Uber is officially on the hook for $100 million to its drivers. But did the ride-hailing company actually come out on top with this settlement?
Uber has agreed to pay up to $100 million to 385,000 drivers named in two class-action suits brought against the ride-hailing firm in California and Massachusetts. Under the terms of the settlement, Uber will also make a number of changes to its business practices. But one thing the company won’t have to do: Classify its drivers as full-time employees.
Uber drivers will continue to work as ICs, and the company won’t have to worry about providing benefits or overtime compensation to these drivers moving forward.
Referring to the fact that the company won’t be changing drivers’ employment status, which could essentially put its entire business model in jeopardy, Uber CEO Travis Kalanick said, “That’s why we are so pleased that this settlement recognizes that drivers should remain independent contractors.”
The settlement would also:
- require Uber to give drivers more warning before they are removed from the service and establish an appeals process for drivers who believe they have been unfairly terminated
- allow drivers to post signs in their cars soliciting tips from riders (note: the signs must explain tips are not included or required), and
- create “driver associations” that will represent workers in talks with management.
‘Debate will not end here’
Before the settlement is finalized, it must be approved by U.S. District Judge Edward Chen. Until that happens, the lawsuits are slated for a jury trial that’s been set for June.
If these lawsuits were to go to a jury trial, a loss could very well force Uber to reclassify its drivers as full-time employees, which could add billions in costs in the form of healthcare benefits, automobile expenses, etc.
Although this settlement is widely being regarded as a victory for Uber, the attorney representing the drivers in both lawsuits, Shannon Liss-Riordan, made it clear the employee classification debate is far from over.
As Liss-Riordan put it:
“No court has decided here whether Uber drivers are employees or independent contractors and that debate will not end here.”
DOL’s take on Uber drivers
If HR pros remember, the status of Uber drivers even caught the attention of the DOL. But first, in a surprising move the California Labor Commission said that Uber drivers were actually employees and not ICs.
The DOL then followed up with 15-page Administrator’s Interpretation where the agency spelled out how employers should determine whether an individual is an IC or a full-time employee.
Simply put, the agency said: Employers should always use the DOL’s “economic realities” test to determine a worker’s classification.
This test is designed to determine whether:
- an employee is economically dependent on the employer, which would make him/her an employee, or
- the person is in business for himself or herself, which makes him/her an IC.
The economic realities test includes the following six factors that employers can use on a case-by-case basis to pinpoint the correct way to classify an individual:
- the extent to which the work performed is an integral part of the employer’s business
- the worker’s opportunity for profit or loss depending on his or her managerial skill
- the extent of the relative investments of the employer and the worker
- whether the work performed requires special skills and initiative
- the permanency of the relationship, and
- the degree of control exercised or retained by the employer.
