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Uber just settled 2 major lawsuits, and its drivers still aren't employees

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Uber drivers will remain independent contractors, not employees, the company announced Thursday after settling two major class-action lawsuits challenging the very essence of the company's business model.

After two and a half years of legal dispute, Uber says it has reached a compromise with its drivers in California and Massachusetts, according to the company's public announcement:

  • Uber will continue to recognize drivers as independent contractors, not employees;
  • Uber will pay plaintiffs $84 million and an additional $16 million on the condition that Uber goes public, and, within the first year of its IPO, increases in valuation to about $94 billion;
  • Uber will not deactivate drivers who regularly decline trips while logged on to the app, publishing the company's first driver deactivation policy;
  • Uber will create an appeals process in California and Massachusetts for drivers who disagree with the company's terms as well as create a driver's association, funded by the company, to facilitate discussions over company and drivers' issues

It's still unknown how many Uber drivers are involved in the class-action cases; however, drivers who have put in more than 25,000 miles for Uber could be paid up to $8,000 each in the settlement, Shannon Liss-Riordan, the attorney representing the drivers, emailed in a statement to Quartz.

After launching six years ago, Uber, which now has more than 450,000 active drivers on the app every month in the United States, admits to not having "always done a good job working with drivers."

A federal judge granted drivers in California's case — which argued that Uber's resistance to classifying drivers as employees violated the state's labor laws — class-action status last September, with a trial date set for June 20, 2016.

In keeping drivers as contractors, Uber has touted drivers' ability to keep flexible hours, allowing the company to forgo minimum wage and overtime payment requirements, as well as having to provide worker's compensation, health benefits, and covering driver expenses.

Go Deeper:

  • Last June a California regulator said that under state labor codes Uber drivers meet the definition of an employee. Vox's Timothy Lee explains why that was such a big deal.
  • Vox's Matthew Yglesias explains why the "Uber for X" business model hasn't worked as well for other companies.