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The judge rejected Uber’s $100 million driver settlement package, but that doesn't mean the drivers win

Drivers might not see as much money if they go to trial.

New York Uber Drivers Protest Rate Cuts Spencer Platt / Getty

A federal judge rejected a $100 million settlement between Uber and a group of drivers who sued for damages and a reclassification of their employee status, potentially prolonging the years-long suit.

While the rejection may seem like a temporary win for the drivers eager to take the case to trial, sticky legal hurdles would make it much more difficult for the plaintiffs to win as large a financial award as the current settlement.

Uber drivers in Massachusetts and California filed a pair of suits seeking employer-sponsored benefits from Uber and argued they should have been classified as employees. The two sides settled in April under the agreement that drivers would still be considered independent contractors but would receive a portion of the $100 million settlement and other benefits such as an appeals panel for drivers who are fired.

The $100 million settlement was broken up into a $84 million fund, with the remaining $16 million coming when Uber goes public.

Judge Edward Chen rejected the agreement because of a very specific part of the settlement that included a $1 million payout related to the Private Attorney General Act. Chen argued the $1 million is much smaller than the likely $1 billion Uber would have had to pay had it gone to trial.

Because that one part of the settlement was seen as too low, Chen threw out the entire $100 million agreement. Under PAGA, plaintiffs essentially act on behalf of the state to rectify labor issues that would affect a large class of workers.

What’s next?

Uber and the drivers suing Uber have a few options.

The first move is for both Uber and the plaintiffs — along with their attorney, Shannon Liss-Riordan — to go back to the negotiating table and come up with a new agreement.

If that doesn’t work, the plaintiffs will likely take it to trial. Some members of the group were initially upset with Liss-Riordan for settling and had preferred going to court. Liss-Riordan, however, contends she is ready and willing to represent plaintiffs in court if necessary.

While it may seem like that means both Uber and Liss-Riordan are back to the drawing board, so to speak, there are actually a few fundamental changes that would affect how this trial plays out.

The original agreement encompassed close to 400,000 drivers, but if the two parties can’t come up with a new settlement, that group could be reduced to only about 8,000 drivers, Liss-Rordan said.

It has to do with a reading on Uber’s contract with its drivers. The judge had earlier ruled that Uber could not prevent other drivers from joining the suit, despite a section of Uber’s driver contract that says drivers cannot seek a lawsuit unless they explicitly opt out. Some drivers were unaware of this provision and did not opt out. Uber is in the process of appealing this reading.

If the two sides can’t strike a new agreement, a trial could bring that back into play. If Uber wins the appeal on this reading of its driver arbitration agreement, then only the drivers who opted out of the arbitration clause would be represented, or about 8,000 plaintiffs.

Even if Uber’s driver arbitration clause is thrown out, Uber is still looking to narrow the field of plaintiffs by appealing the class certification Chen awarded. The company had previously argued that the case should not be considered a class action suit given there is no such thing as a “typical” Uber driver.

If it goes to trial and the class certification is thrown out, any damages drivers receive from the case would only apply to the two groups of plaintiffs named in the pair of suits.

“The settlement, mutually agreed by both sides, was fair and reasonable,” Uber spokesperson Matt Kallman told Recode. “We’re disappointed in this decision and are taking a look at our options.”

Ideally, both sides would renegotiate an agreement that alleviated Judge Chen’s concerns about the penalties paid out with regards to PAGA.

“As I’ve said before, I will take the case to trial and fight my hardest for the Uber drivers,” Liss-Riordan, who has publicly defended her decision to settle the case, told Recode.

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