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A clue to how much more Uber would have to pay drivers as its employees

A clue to how much more Uber would have to pay drivers as its employees

A proposed settlement narrows down the company’s payout to up to $100 million from potentially over $700 million

A proposed settlement between Uber and drivers in California and Massachusetts may have saved the company over US$600 million in payouts to drivers on work-related expenses.

Uber agreed to pay the drivers an initial $84 million and a $16 million top-up depending on the company's valuation if it goes public.

But the settlement in the class-action lawsuits sidesteps the core issue of whether the drivers should be classified as employees, which could have increased the amount Uber would have to pay the drivers.

The ride-hailing company uses independent contractors rather than employees as drivers because it holds that the model gives the drivers a sense of ownership and also work flexibility. Figures disclosed by Shannon Liss-Riordan, the attorney for the drivers, in court on Monday suggest that the policy also translates into large savings for the ride-hailing company.

The settlement has to still get the preliminary approval of District Judge Edward M. Chen of the U.S. District Court for the Northern District of California. The calculations were released Monday after Judge Chen refused on Friday to allow the redaction of certain portions of the settlement motion, such as information on the value of the claims.

As employees, the drivers in California would be entitled to as much as $426 million in mileage expense reimbursement for trips made on the ride-hailing platform between 2009 and April of this year, according to the lawyer’s estimate. Uber had put the amount much lower at $169 million. Massachusetts drivers would have got another $98 million.

Phone expenses for the California drivers were pegged at $24.7 million and for those in Massachusetts at $4.6 million, according to the lawyer’s estimate. Another $176 million in mileage expenses reimbursement would also fall due to drivers in California who were not part of the class in the lawsuit but were included in the settlement.

The estimate provided by Liss-Riordan also includes $122 million in claims for alleged “unlawful taking of gratuities” by Uber.

Uber has challenged the class certification in an appeals court, according to the Liss-Riordan, in defense of the settlement.  An adverse decision by the the U.S. Court of Appeals for the Ninth Circuit would have diminished the class size from more than 240,000 drivers to approximately 8,000 drivers, or fewer depending on the Ninth Circuit’s reasoning, she wrote in a filing.

Uber also said it would appeal the matter further, if necessary, in the Supreme Court. The company had also informed her that at trial in the district court it would argue that it had satisfied Section 2802 of the California Labor Code, which deals with employee expenses, by structuring the fare to be an all-inclusive one that takes into account things like expenses, Liss-Riordan wrote in the filing.

Objections from drivers to the settlement have risen. “Some drivers out there are doing this full time working night and day......So I urge you to reconsider and demand more from UBER and stand with the little fellas trying to making a living,” according to a filing by Samy Jumaan to Judge Chen. Another driver, Edward Hanania appealed to the Judge for help against Uber who "is taking unfair advantage of us.” Hanania added that unlike union workers who have protection and many industries that have laws to protect them, “you are all we have right now.”

Uber  faces more class-action lawsuits in Florida and Illinois from drivers seeking reclassification as employees. Unlike the ones in Massachusetts and California, the new ones aim to be national class-action suits.

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