An attempt by Uber Technologies, Inc. to settle a class action brought by approximately 350,000 drivers who claimed they were employees and as such, entitled to various expenses, was rejected by U.S. District Judge Edward Chen in San Francisco, who found the settlement unfair, inadequate, and unreasonable for Uber drivers.

The drivers had claimed in the action that they should properly have been deemed employees rather than independent contractors, and should have been reimbursed for gasoline, vehicle maintenance, and other expenses.

The settlement terms, valued at upwards of $100 million, would have affected approximately 385,000 current and former Uber drivers in California and Massachusetts. However, some drivers objected to the terms, in particular because the proposed settlement amount was far below the total potential damages that were estimated to be roughly $850 million. The Judge was also concerned about claims related to California’s Private Attorney General Act, which could result in penalties against Uber far exceeding the $1 million allowed in the settlement.

In rejecting the settlement, Judge Chen noted that $16 million of the proposed settlement would have been paid to the drivers only if Uber's valuation grew by a certain benchmark within a year of any initial public offering. However, Uber did not produce specific information that the financial outcome was likely. Judge Chen remarked that the remainder of the settlement, $84 million, represented a substantial discount on the full value of the drivers’ claims.

The attorney for the drivers, Shannon Liss-Riordan, indicated that the parties could reach a new settlement agreement that satisfied the Judge's concerns. However, without a settlement, there would only be about 8,000 drivers included in the case because many other drivers had failed to opt out of the arbitration clause in the Ubers licensing agreement.

Lexis subscribers can access the opinion at: O'Connor v. Uber Techs., Inc., 2016 U.S. Dist. LEXIS 110281 (N.D. Cal. Aug. 18, 2016)

Lexis Advance subscribers can find the opinion at: O'Connor v. Uber Techs., Inc., 2016 U.S. Dist. LEXIS 110281 (N.D. Cal. Aug. 18, 2016)

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