Printer-friendly page Subscribe to newsletters and RSS feeds Contact the firm Enlarge text E-mail this page
Legal Insights
Steve Hirschfeld and Dan Handman Quoted in San Francisco Business Times Regarding Uber Settlement
04.30.2016

HK's Steve Hirschfeld and Dan Handman are quoted in the San Francisco Business Times regarding the recent settlement between Uber and some of its drivers.

The text of the article is below:

Uber settles: Big changes? Or small change?

A surprise settlement offer in Uber's worker-misclassification lawsuit could amount to a payout of $100 million to aggrieved drivers, who had sued the company for a broad range of complaints related to their classification as independent contractors.

But even more significantly, the settlement suggests that the company is aiming for a change in tone.

The settlement agreement, which includes $84 million in compensation to drivers plus an additional $16 million in the event of a favorable IPO, will amount to peanuts for the vast majority of the 385,000 drivers in the lawsuit. And it keeps drivers' status as independent contractors rather than employees in place. But non-monetary terms suggest that the company wants to change its poor reputation among the company's 450,000 drivers.

"If Uber stands by its claims to empower drivers, I think ultimately this lawsuit will have helped out drivers big time and could even lead to a better relationship between Uber and its drivers,” said Harry Campbell, driver and author of The Rideshare Guy."But like with the Lyft settlement case, this all still needs to be approved by the judge."

A Lyft settlement agreement proposed in January, which had amounted to $12.25 million payout and changes to its terms, was ultimately rejected by a federal judge on the grounds that the monetary portion was insufficient. Regardless, many observers are expecting that Uber’s will be approved: “Uber has the advantage of going second, and as such, it’s no coincidence that the proposal is closer to the judge’s suggested figures following the Lyft rejection,” said Jason Brown, a San Francisco labor lawyer at Fisher & Phillips LLP. “This makes it more likely that Uber's settlement will be approved.”

Stephen Hirschfeld, CEO of the San Francisco-based Employment Law Alliance, added that he'd "be very surprised if the judge doesn’t approve the settlement. It's hard for me to think that there are any plaintiffs' lawyers who can do better based on the merits of this case.”

With 385,000 drivers in California and Massachusetts eligible to receive funds, the vast majority of drivers are likely to see very little of that money: Legal fees will account for 25 percent of the potential $100 million, and the rest will be allocated based on a weighted formula: “Drivers falling into the category of those who have driven the greatest number of miles (more than 25,000) may receive $8,000 or more,” wrote plaintiff’s attorney Shannon Liss-Riordan.

That number amounts to only about 11,000 drivers, however, according to court filings, with other factors including a past arbitration agreement affecting payouts.

But the non-monetary terms are more extensive than those included in the Lyft settlement and represent “significant benefits to drivers,” added Liss-Riordan.

The non-monetary terms include changes to how Uber penalizes drivers for poor user ratings and low acceptance rates, a frequent grievance among many drivers who felt they had no leverage under the hammer of the company’s algorithms. Drivers will be allowed to solicit tips, which had previously been prohibited, and redress complaints through a drivers' association that the company says it will facilitate.

“I think the real benefit for drivers from this lawsuit will come from more transparency in a driver's rights,” said Campbell.

Uber’s relationship with its drivers has rarely been smooth, with frequent complaints of slashed fares, poor communication and unfair deactivation policies. But in a blog post on the settlement, CEO Travis Kalanick struck a notably more conciliatory tone, writing that “we haven’t always done a good job working with drivers. It’s time to change.”

While the settlement may represent a considerable change in policy – not to mention tone – for the ride-hailing giant, its effect on the broader "gig economy" may be more limited than expected.

"Given the peculiarities of this case and Uber’s business in general, I do not think this settlement will have a profound effect on the way that companies classify workers," said Daniel Handman of employment law firm Hirschfeld Kraemer's San Francisco office. "However, the size of this settlement will certainly force companies to give these issues careful consideration in the future."