April 22, 2016
Uber is settling two lawsuits in California and Massachusetts by paying up to $100 million to drivers who fought to be classified as employees rather than independent contractors. The suits posed a threat to the San Francisco-based ride hailing company’s on-demand business model, potentially halting global expansion and resulting in increased fares.
The company also agreed to policy changes that will reduce control over drivers, and more closely reflects independent contractor status. Uber’s rapid rise has been driven by a network of drivers whose expenses (gas/mileage) aren’t covered, nor do the drivers receive benefits (health insurance, overtime, sick days).
If the company was forced to classify drivers as employees, it posed a massive threat to profit margins. The settlements still must be approved by a District Court judge.