Uber to Pay $8.4M to End Calif. Drivers’ Misclassification Suit

Uber has agreed to pay $8.4 million to end the misclassification class action from about 1,322 California drivers who continued to opt-out of Uber’s arbitration clause, covering a period before the enactment of the state’s new gig-economy law, Proposition 22.

In a motion for preliminary approval of the deal filed in California federal court, the class said that this suit picks up where another key suit left off – the O’Conner v. Uber settlement in 2019 – and continues through to December 2020, the date of enactment for Proposition 22, which was approved by California voters the month prior.

“Although this settlement (once again) does not resolve the question of whether Uber drivers are employees under California law, it is nonetheless of significant value to class members. Given the passage of Proposition 22, the import of that determination has been blunted, as it is unclear whether the answer to the question of whether Uber can satisfy the ABC test will determine drivers’ status going forward.”

In August, the drivers asked for summary judgment on the grounds that Uber Technologies Inc. misclassified them under the ABC test — a Golden State worker status test later codified as Assembly Bill 5 — saying they can still pursue claims from before Proposition 22 went into effect. The ballot measure exempted certain app-based companies from the law.

Using the ABC test from the California Supreme Court's 2018 holding in Dynamex Operations West Inc. v. Superior Court, Uber did not meet the burden of classifying the drivers as independent contractors, the drivers argued last year.

Under the test, workers are employees unless a hirer demonstrates the worker is free from control; performs work outside the hirer's usual business; and independently does work of the same nature as the work performed for the hirer.

Uber fails the second prong of the test, the drivers argued in August.

U.S. District Judge Edward M. Chen initially said in January 2021 when certifying the class that Proposition 22 "does not apply retroactively." Uber then sought clarification, and in April, the judge walked back the comment, saying in an order that Uber's argument in favor of retroactivity was correct and that the question "should not be decided in the context of class certification."

The class period for the settlement announced Thursday begins in February 2019 — where the $20 million O'Connor settlement left off — and ends with the enactment of Proposition 22.

"This court previously considered and approved a $20 million settlement on behalf of roughly 15,000 California and Massachusetts drivers who were not bound by Uber's arbitration clause," the drivers said Thursday. "This settlement covers a much smaller class of roughly 1,322 California Uber drivers who have continued to opt out of Uber's arbitration clause with each new contract."

The drivers pointed out that the deal covers not just a smaller class but also a shorter period of time — just 22 months compared to O'Connor's 114 months.

"Thus, this settlement amount (which is non-reversionary) will provide class members with higher settlement amounts (on a per mile basis) than those already approved as fair and adequate by this court in O'Connor," the drivers said Thursday.

Under the deal, the plaintiffs' counsel would apply for fees no greater than 25% of the gross settlement fund — or about $2.1 million.

Shannon Liss-Riordan of Lichten & Liss-Riordan PC, who represents the drivers, said in a statement to Law360 on Friday that they are pleased to have reached the agreement with Uber.

"This settlement comprises what we calculate to be the full reimbursement damages for these drivers," she said.

An Uber driver filed the suit in 2019, and drivers Christopher James and Spencer Verhines later joined and replaced the initial driver as the named plaintiffs.

The drivers alleged that Uber misclassified them as independent contractors and thus failed to reimburse business expenses, pay minimum wage and overtime, and provide itemized pay statements and sick leave.

In May 2020, the drivers sought class certification and Uber asked the court to nix part of the suit. The following month, the court tossed the paid sick leave claims but said the drivers could refile, and they did so in July 2020.

In September 2020, Uber urged the court against certifying the class, arguing that the allegations were too individualized. The argument seemed to resonate with Judge Chen, who during a December 2020 hearing questioned whether the drivers could overcome predominance issues.

In January 2021, the court said the drivers could move forward as a class on their expense reimbursements and wage statement claims, but not on additional claims that Uber failed to pay proper minimum wage, overtime and paid sick leave, saying those were too individualized.

As the expense reimbursements and wage statement claims moved forward, the court or a jury should use the ABC test for determining if the drivers were independent contractors or employees, Judge Chen said at the time.

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