Uber drivers will continue to be classified as independent contractors, not employees according to settlements of two cases in California and Massachusetts. This is the outcome the ride-booking company hoped for all along. And one that we believe will impact upcoming employment litigation.
According to the settlement, the company will pay the plaintiffs in these two class action lawsuits in California and Massachusetts $84 million, plus another $16 million if Uber goes public and within a year. The trade-off is that Uber can continue to treat their employees as independent workers, making them responsible for the cost of the maintenance and gas for their cars. In essence, Uber can continue to keep their costs low by continuing its ability to shift those expenses to its drivers.
From my experience as an employment lawyer, I see this settlement as having possible ramifications well beyond the Uber lawsuits. As the sharing economy grows, companies like Airbnb, TaskRabbit, Lyft and others will face this issue. As they continue to sprout up, I expect the question of whether those who work for them are employees or independent contractors to become more and more frequent. The business model for these types of companies relies on keeping labor costs low by avoiding the need to pay independent workers the same kind of wages, expenses and benefits as employees.
Right now, this settlement only applies in the Uber situation but we expect that it’s just the beginning.