Uber to Cough Up $20 Million as Settlement for Driver Classification Lawsuit

Ride-hailing company Uber is the most valuable startup in history, but while it has taken the world by storm, it has also been beset with controversies and more so over the past few years. One of the things about the company that has provoked consternation from many quarters is that drivers are classified as contractors instead of employees and this allows Uber to not pay them the benefits that an employee would deserve. Eventually, this led to a lawsuit in California, and it has now emerged that Uber has decided to settle the case for a payment of $20 million. This has been one of the biggest issues for Uber over the past few years, and now that the company is gearing up for its mega initial public offering, it is only natural that they are willing to settle lawsuits that might raise uncomfortable questions from potential investors.

The class-action lawsuit initially had as many as 385,000 drivers plying their trade for the company in Massachusetts and California. However, there was one fine print, and that was the fact that, due to the nature of contracts with the drivers, Uber was free to speak one on one with drivers and come to a resolution. This shrunk the pool of drivers significantly to 13,600 as many drivers opted out of the process and those drivers will be ones who will get a slice of the settlement.

The settlement was filed at a federal court in San Francisco on Monday. Shannon Lee-Riordan, the attorney who represented the drivers in the lawsuit, spoke regarding the entire settlement process. She said, “Uber has an arbitration clause which it very rigorously enforces. It’s a myth that these opt-out provisions in arbitration clauses really make these agreements voluntary.” She went on to add that she would be seeking $5 million for legal expenses, which will be over and above the $20 million settlement agreed by Uber.

2019 is going to be a vital year for Uber as they plan to launch an IPO that is slated to be the biggest in the history of Wall Street. According to industry experts, the IPO could value the company at a staggering $120 billion, and it is hardly surprising that the company want to minimise as much bad press as possible. It is not yet known when the IPO is going to be launched but industry insiders believe it will happen towards the end of the year.

ABOUT THE AUTHOR

Sandra Kinsey

Sandra Kinsey joined FinanceLong team as a news editor with years of experience in finance industry. She holds master degree in business administration with majoring in finance. She's been actively involved in analyzing the most active stocks and commodities. She has keen interest in forex trading.

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