The day before its planned initial public offering, ride-hailing giant Uber Technologies Inc. has announced it settled with thousands of drivers over claims it misclassified them as independent contractors.
Uber disclosed in a U.S. Securities and Exchange Commission filing Thursday that it reached agreements to ”resolve the classification claims of a large majority” of 60,000 U.S. drivers who filed, or expressed intention to file, arbitration demands. The San Francisco-based company set aside $146 million to $170 million for settlement payouts.
The question of drivers’ classification, independent contractor versus employee, has long plagued Uber and its gig economy peers. On Wednesday, hundreds of Uber and Lyft Inc. drivers went on strike, demanding pay and benefits, which independent contractors don’t receive, and better working conditions. Uber reserved $132 million for misclassification settlements in December and listed classification suits as a risk factor in its earlier S-1 filing.
Uber has maintained its drivers are independent contractors because they drive their own cars and choose their hours. But the company has faced a series of legal challenges over its worker classification, including rulings in France and Philadelphia.
Classification changes also could come soon to Uber’s home state, California. In April 2018, the California Supreme Court adopted the worker-friendly ABC test to determine contractor status in its Dynamex Operations West v. Superior Court ruling, requiring companies show that workers are “free from control” and perform “work that is outside the usual course” of the business. The U.S. Court of Appeals for the Ninth Circuit found last week that the Dynamex ruling applied retroactively.
Uber’s Thursday filing listed Dynamex as an example of a “recent judicial decision” that “could require classification of Drivers as employees.” Its “business would be adversely affected if Drivers were classified as employees instead of independent contractors,” according to Uber’s S-1 filing.
Such a reclassification could require Uber to pay “significant additional expenses,” including minimum wage and overtime pay, employee benefits, taxes and “penalties.” If the company takes action against striking workers found to be misclassified, it also could face complications under the National Labor Relations Act.
Uber and Shannon Liss-Riordan, a partner at Lichten & Liss-Riordan, who has represented Uber drivers in litigation over classification, did not immediately respond to request for comment. Keller Lenkner managing partner Travis Lenkner, who has represented drivers in misclassification suits against Uber, declined to comment.
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