Uber agrees to pay drivers $20 million to settle independent contractor lawsuit

At a time when the gig economy is under heavy scrutiny around its practices of classifying workers as 1099 independent contractors, IPO-bound Uber has officially settled a six-year-long case regarding this exact topic.

Today, Uber agreed to pay $20 million to settle the class-action lawsuit, brought forth by Douglas O’Connor and Thomas Colopy way back in 2013. This comes after a judge rejected Uber’s offer to settle for $100 million back in 2016.

The suit claimed Uber classified its drivers as contractors to skirt around paying them a minimum wage and providing benefits. Since its original filing, the suit was granted class-action status to represent hundreds of thousands of drivers in California and Massachusetts. That victory for drivers was short-lived when an appeals court ruled Uber’s arbitration agreements were valid and enforceable. That decision reduced the number of drivers in the class to about 13,600.

Those eligible for a payout from the settlement include those who drove for Uber between Aug. 16, 2009, and Feb. 28, 2019, in California or Massachusetts. They must also not be bound by Uber’s arbitration clause.

In addition to the $20 million settlement, Uber has agreed to implement a comprehensive written deactivation policy, a formal appeals process for certain deactivation decisions and quality courses for drivers.

“Uber has changed a lot since 2013. We have made the driver experience even better through improvements like in-app tipping, a redesigned driver app, and new rewards programs like Uber Pro,” an Uber spokesperson told TechCrunch. “We’re pleased to reach a settlement on this matter and we’ll continue working hard to improve the quality, security and dignity of independent work.”

The case is O’Connor v. Uber, 13-cv-03826 in the U.S. District Court for the Northern District of California (San Francisco).

Lyft lays out financial risks associated with reclassifying drivers

In Lyft’s S-1 this morning, the company laid out the potential consequences for converting its drivers from independent contractors to W-2 employees. This, of course, has been an ongoing conversation within the gig economy.

Those who work as 1099 contractors can set their own schedules, and decide when, where and how much they want to work. For employers, bringing on 1099 contractors means they can avoid paying taxes, overtime pay, benefits and workers’ compensation.

As Lyft notes in the S-1, this conversation has resulted in a number of lawsuits, arbitration proceedings, government investigations and more.

“The tests governing whether a driver is an independent contractor or an employee vary by governing law and are typically highly fact sensitive,” Lyft states in its S-1. “Laws and regulations that govern the status and misclassification of independent contractors are subject to changes and divergent interpretations by various authorities which can create uncertainty and unpredictability for us. We continue to maintain that drivers on our platform are independent contractors in such legal and administrative proceedings, but our arguments may ultimately be unsuccessful.”

In the event Lyft is forced to reclassify its drivers, that could result in a number of new financial burdens for the company. That includes:

  • Expense reimbursement
  • A potential injunction prohibiting Lyft from continuing its current business practices
  • Claims for employee benefits, social security, workers’ compensation and unemployment
  • Monetary exposure relating to failure to withhold and remit taxes, unpaid wages, and wage and hour law requirements

Lyft goes on to note that reclassifying its drivers as W-2 workers “may require us to significantly alter our existing business models and operations.” And this is one of those risks that could very easily happen.

As Lyft points out, it’s actively involved in six class-action lawsuits pertaining to driver classification. And the company has already settled a couple of lawsuits to the sum of $27 million in 2013, and $1.95 million in 2018. Meanwhile, California is actively examining this issue in Assembly Bill 5, which would improve protections and rights for gig economy workers. That bill was introduced in light of a groundbreaking state Supreme Court decision in April.

Caviar now offers accident and disability insurance for couriers

If you’re a gig economy worker, you’ve probably settled into the reality that insurance and benefits aren’t going to be available to you. Well, not unless on-demand companies make the switch from 1099 independent contractors to W-2 employees. While that’s not changing — yet — Square’s on-demand food delivery service, Caviar, is now offering insurance protection to all of its couriers.

“We think this is a positive first step for independent contractor benefits that still gives couriers the flexibility and freedom to earn – and be covered – on their own schedule,” Caviar wrote in a blog post.

This occupational accident insurance will ensure that couriers are covered in the event any accidents happen while they’re making deliveries for Caviar. This insurance, which comes at no cost to the couriers, activates the second a courier accepts an order Caviar and ends the second its complete.

We’ve wanted to offer a policy like this for a while,” the blog post states.

This new insurance is in part thanks to OneBeacon, an insurance company Square partnered with to create a type of insurance that is unique to gig economy workers. Caviar’s Occupational Accident insurance entails coverage up to $1 million per accident, $100,000 accidental death benefit and survivor’s benefits for dependents, and both temporary and continuous disability at 50 percent of the courier’s average weekly earnings.

We’re including this in our standard offering because we feel that providing insurance to protect couriers while they’re actively delivering with Caviar is the right thing to do,” the blog post states.