Uber’s $8.4M Calif. Driver Misclassification Deal Wins First OK

This week, a California federal judge passed a preliminary approval for a deal that forces Uber to pay $8.4 million. The judgment will end misclassification claims from more than 1,300 Golden State drivers covering a period before the enactment of Proposition 22, a 2020 law that designated some app-based drivers as independent contractors.

U.S. District Judge Edward M. Chen called the amount of recovery favorable and underscored that no money would go back to Uber Technologies Inc., since there will be two attempts at getting checks into the hands of the drivers in the class and then any remainder will go to a San Francisco legal aid nonprofit.

This major deal picks up where a 2019 settlement of another suit, O'Connor v. Uber, left off and continues through to December 2020, the date of enactment for Proposition 22, the state's voter-approved gig economy law. The $8.4 million agreement covers 1,322 California drivers and provides an average settlement per class member of approximately $4,750, the court was told.

The $20 million O'Connor settlement was for 11,000 drivers in California and 2,600 in Massachusetts, with average expected payments of $2,206 per driver after deduction of fees and other costs.

One of Uber’s lawyers, Theane Evangelis of Gibson Dunn & Crutcher LLP, told the court on Thursday that the O'Connor settlement provided "a road map" for the current deal.

At the end of the hearing, Judge Chen set the hearing for final approval of the settlement for July 14.

He also asked the parties to highlight the dollar amounts in the notices that they send out to the class members.

"Bold the dollar signs," he said, "When people see that they get a little more motivated to respond."

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

In the case before the court, 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 August, the drivers asked for summary judgment on the grounds that Uber misclassified them under the ABC test — a Golden State worker status test later codified as Assembly Bill 5 — saying they could still pursue claims from before Proposition 22 went into effect.

The $8.4 million agreement does not resolve whether Uber drivers are employees under California law, but "is nonetheless of significant value to class members," the motion for preliminary approval filed on behalf of the drivers states.

"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," the drivers told the court in their motion for preliminary approval.

The Proposition 22 ballot measure, which passed in November 2020 with 58% of the vote, carved out certain drivers and delivery workers for app-based companies from the three-part worker classification test.

Because Proposition 22 designated app-based drivers as independent contractors subject to certain conditions, those workers will not be entitled to certain protections guaranteed to employees, such as minimum wage and overtime pay and unionization rights.

In August, Alameda County Superior Court Judge Frank Roesch handed a win to Proposition 22's challengers — a group of drivers for services including Uber, Lyft Inc. and DoorDash Inc., along with the Service Employees International Union and its California chapter — by finding the measure unconstitutional.

Judge Roesch said that the California Constitution grants the Legislature "plenary power, unlimited by any provision of this Constitution, to create, and enforce, a complete system of workers' compensation."

Proposition 22 is "constitutionally problematic" because the Legislature's power is not "plenary" if a ballot initiative statute can limit its ability to include app-based workers in the compensation system, the judge said.

The state and an organization created by DoorDash, Lyft, Instacart and Uber, which intervened on behalf of the state, appealed the decision.

In briefs filed last month, California and Protect App-Based Drivers & Services Coalition, urged a state appeals court to reverse the judge's rejection of the voter-approved measure saying the measure does not conflict with the state legislature's authority and can be "harmonized" with it.

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