A federal judge has rejected the proposal to settle a major class-action lawsuit by California and Massachusetts drivers against Uber for $84m, ruling that “the settlement as a whole as currently structured is not fair, adequate, and reasonable”.
In a ruling issued Thursday, Judge Edward M Chen noted that the settlement “yields less than 5% of the total verdict value of all claims being released”.
In particular, Chen objected to the portion of the settlement that would accept $1m to settle a claim that is estimated to result in penalties to Uber of over $1bn, without providing any “coherent analysis” to justify “such a relatively meager value”.
“The settlement, mutually agreed by both sides, was fair and reasonable,” an Uber spokesperson said in a statement. “We’re disappointed in this decision and are taking a look at our options.”
“I am disappointed the judge did not approve the settlement, but I understand and I have heard him,” said Shannon Liss-Riordan, the plaintiff’s attorney.
If a new agreement that meets the judge’s approval is not reached, she said, “I will take the case to trial and fight my hardest for Uber drivers.”
Prior to the proposed settlement, the case had been scheduled to go before a jury in June. The future of the case is now unclear, especially since a decision on the suit’s class action certification is still pending before the ninth circuit court of appeals.
Should Uber win that appeal – which some analysts suggest is likely – the scope of the suit would be substantially reduced, from 240,000 drivers to 8,000 drivers, and Uber could end up on the hook for much less than $84m.
Those drivers not included in that reduced class would have to pursue claims against Uber individually, through arbitration.
“We are prepared to start bringing these claims individually, and more than 1,000 drivers in California have already signed up with us to bring individual claims in arbitration if that becomes necessary,” Liss-Riordan said.
Uber reached the settlement agreement with Liss-Riordan in April 2016, following three years of litigation over the question of whether Uber drivers are employees or independent contractors.
By classifying drivers as independent contractors, Uber avoids substantial costs, such as minimum wage, overtime, healthcare benefits, and expense reimbursements. Independent contractors are also ineligible to form unions.
Under the terms of the proposed settlement, Uber drivers would have remained independent contractors, but the company agreed to some non-monetary changes to its policies, including allowing drivers to accept tips.
Chen questioned the worth of the non-monetary agreements, however, writing: “Much of this non-monetary relief is not as valuable as the parties suggest ... Uber may be permitting tipping, but it is also telling riders not to tip, further decreasing the amount of tips riders are likely to give”.
The proposed settlement was harshly criticized by many labor advocates and drivers, especially after it was revealed that Uber could have been forced to pay $852m in damages if it had lost the case in court.
Notably, the original plaintiff in the case, Douglas O’Connor, filed an objection to the settlement, stating: “Uber drivers are being sold out and shortchanged by billions of dollars while sacrificing the determination of their classification as employees.”
In his ruling, Chen noted that “the vast majority of class members are slated to receive less than $100 each from the settlement.”
But the judge’s chief objection to the settlement was the disposition of a claim brought under California’s Private Attorney General Act (PAGA).
The 2004 state law allows for individual employees to bring claims against employers over violations of state labor law – an action that would usually be performed by state enforcement agents.
“Where plaintiffs bring a PAGA representative claim, they take on a special responsibility to their fellow aggrieved workers who are effectively bound by any judgement,” Chen wrote.
In the proposed settlement, Uber and Liss-Riordan agreed to accept $1m for the PAGA claim, but a representative of California’s labor & workforce development agency estimated that the potential penalty for Uber under the law would exceed $1bn.
“Plaintiffs propose settling PAGA for only 0.1% of the potential verdict value, a reduction that the [Labor & Workforce Development Agency] has found has no rational basis,” Chen wrote.
In the longterm, it is possible that the question of drivers’ employment classification will become moot. On Thursday, Uber announced that it will begin deploying autonomous cars in Pittsburgh in a few weeks.
This article was written by Julia Carrie Wong in San Francisco, for theguardian.com on Friday 19th August 2016 02.14 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010