For Uber, $100 million was a pretty good deal for an open road.
That was the price tag reached Thursday night to put aside two lawsuits, one in California and one in Massachusetts, against the leading ride-hail service for how it classifies and treats its drivers. The lawsuits charged San Francisco-based Uber with exploiting its labor pool in the two states by treating them not as employees but as independent contractors.
But now, the question is settled, at least for the time being. The drivers won some cash — $84 million now and potentially $16 million more after a sale or a public offering — and some concessions, but the real winner was Uber.
With the modest payout, its path to a public offering and increased valuation now looks clear of road blocks. This is great news for the company, not so great for the drivers who make the company, and others like it, work.
The employee vs. contractor question is at the heart of the so-called sharing economy, the labor model of a swath of tech-fueled startups that run on people power without the inconveniences of salaries or benefits. Under this system, everyone is a contactor; everyone works for themselves, and no one is responsible for the welfare of those whose labor enriches the investors.
The companies that rely on this model often praise the flexibility their workers have, and this is a selling point for many workers. But the labor that powers a company past its conception into a real business deserves to be recognized and compensated fairly. So far, that hasn’t happened.
The settlement last week settled the question for now. With the challenges dead, Uber drivers remain contactors, and the business strategy of the aptly named Uber, the model and metaphor for countless disruptive dreams in the new economy, is reaffirmed.
The new economy, with the growing reliance on contractor gigs, is not a friendly one for most workers. The San Francisco Examiner has reported widely on the growing strain and narrowing margins of this new work force. With income inequality already dire concern in The City, the worry is that these jobs are only fueling the divide.
Uber CEO Travis Kalanick praised the deal on the company blog, citing the flexibility that contractors enjoy: “Drivers value their independence — the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours. That’s why we are so pleased that this settlement recognizes that drivers should remain as independent contractors, not employees.”
Under the terms of the settlement, which U.S. District Court Judge Edward Chen still needs to approve, drivers gained some protections — regarding how they can be deactivated or bring up complaints — in addition to the payout. Perhaps most valuable to drivers, they will finally be able to solicit tips.
On Friday, representatives of the Teamsters announced plans to organize Uber drivers and others in California’s rideshare industry, similar to what the union has done in Seattle.
But the big question, the reason for the class-action suits in the first place — whether drivers are employees or independent contractors — has been tabled for another time. As the attorney for the plaintiffs, Shannon Liss-Riordan put it: Pushing that question to a trial would be risky since, in San Francisco, Uber is “everywhere and quite popular.”
That’s a sobering statement. People are voting with their apps each time they need a ride. And right now, they are siding with Uber.
Michael Howerton is editor-in-chief of the San Francisco Examiner.