Critics of Uber’s $100M Driver Settlement Have Day in Court

Uber Technologies Inc. may have to return to the bargaining table to show just how badly it wants to avoid a jury trial with drivers demanding to be treated as employees.

The world’s largest rideshare company faced off in court Thursday with critics who say it’s getting off too easily in a proposed $100 million deal with 385,000 current and former drivers in California and Massachusetts that would leave its workforce classified as independent contractors.

Most of the objections that have piled up over six weeks fault the drivers’ lawyer, saying she folded on the lawsuit’s core purpose so she could collect a $25 million fee for herself. Uber, whose $62.5 billion valuation makes it the biggest sharing-economy company, agreed as part of the deal to let drivers solicit tips and allot payouts based on the miles they’ve driven.

The fate of the deal rests with U.S. District Judge Edward Chen in San Francisco, who spoke at the outset of a hearing of the “elephant in the room” — a broad provision in the settlement releasing the company from liability for violations of labor laws. The judge voiced concern that approving the accord would preclude claims over minimum wage, overtime and workers compensation from being pursued in other active cases.

“I don’t want to use too pejorative a term,” the judge said before asking whether the settlement has “hijacked” or “stolen” claims from other lawsuits. “And on top of that, given virtually no value? Isn’t that troubling?”

The hearing ended with the judge saying he will issue a ruling later.

Shannon Liss-Riordan, the drivers’ lawyer, told the judge a company such as Uber “will only come to the table if they can get global peace.” She said she made a strategic decision to focus on mileage reimbursement and tips claims because they were most likely to succeed.

As the case gained momentum, copycat “pile-on” cases were filed, “throwing every claim under the sun into the mix,” Liss-Riordan said.

“My practice has been not to pursue kitchen-sink type complaints,” she said.

Ted Boutrous, a lawyer for Uber, told Chen that negotiations leading to the settlement were conducted at “arm’s length,” and that even during mediation sessions the company maintained an “adversarial” relationship with Liss-Riordan.

Without all the releases included in the accord, “there’s no incentive for Uber to settle,” Boutrous said. “It would be like getting nowhere because there are all these other claims” stemming from the core dispute over whether the drivers are employees or contractors.

Drivers who don’t agree with the settlement can opt out out “and go it alone,” he said.

Some lawyers for objecting drivers have accused Liss-Riordan and Uber of colluding to reach a deal that serves only their interests, while others say the settlement would improperly release the company from claims in 16 other lawsuits.

“The proposed settlement seeks the release of dozens of claims never pled, investigated, nor considered by Ms. Liss-Riordan,” and “bears the hallmarks of collusion,” according to a court filing on behalf of 16 drivers in seven lawsuits.

Liss-Riordan has said criticisms from other lawyers, particularly those who don’t specialize in labor law, are “uninformed” and that some of those attorneys are just trying to muscle in on fees for themselves.

Before Thursday’s hearing, the judge revealed other concerns about the deal, including whether signs saying drivers accept tips could lead to lower customer ratings and, as a result, deactivation by Uber. Chen also ordered Liss-Riordan to justify her 25 percent share of the deal by detailing the hours worked by her and her staff.

Legal experts say Uber will only agree to a settlement that maintains the contractor status of drivers, signaling that workers elsewhere in the sharing economy face a steep hurdle trying to get courts to reclassify them as employees.

That’s because many such companies rely on agreements requiring workers to resolve disputes in private arbitration, and forbidding them from joining class-actions. Uber’s revised driver contracts, revised last year, have already allowed it to smother similar challenges in Arizona, Ohio, Florida and Maryland, with federal judges in those states upholding its arbitration agreements this year.

Uber was sued Thursday by the New York Taxi Workers Alliance over claims that it misclassifies drivers as contractors. The group, which represents more than 5,000 drivers, filed its complaint in Manhattan federal court.

Uber’s agreement with Liss-Riordan calls for an initial payout of $84 million. An additional payout of $16 million would follow if Uber goes public and its valuation increases. The ride-hailing company’s latest infusion of cash — a record $3.5 billion from Saudi Arabia’s sovereign wealth fund — means Chief Executive Officer Travis Kalanick has the finances to continue avoiding a listing of his company any time soon.

Earlier Thursday, a different judge in the same courthouse put off deciding whether to approve Lyft Inc.’s $27 million settlement with its California drivers, who also sued to be treated as employees. U.S. District Judge Vince Chhabria in April rejected an earlier $12.5 million offer, saying it shortchanged drivers in light of the company’s rapid growth.

This time around, the judge asked for more information about Lyft’s exposure in a related lawsuit over tips for drivers and whether it’s appropriate for a settlement to include a broad release from liability for those claims.

The Uber case is O’Connor v. Uber Technologies Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco). The Lyft case is Cotter v. Lyft Inc., 13-cv-04065, U.S. District Court, Northern District of California (San Francisco).