Uber to pay $20M to settle lawsuit over driver classification

Uber will pay $20 million to settle California lawsuits challenging the company's classification of drivers as independent contractors, and not employees owed the benefits of traditional employment.

Resolution of the long-standing fight over benefits and pay comes as Uber is preparing for its IPO later this year. The litigation attacked the ride-sharing company's business model of treating its drivers as contractors to avoid the costs of paying a minimum wage, overtime, sick leave and health insurance.

The cases turned on whether drivers were essentially forced by their contracts to resolve any conflicts one-on-one, behind the closed doors of private arbitration and forbidden to join forces in class-action lawsuits.

Drivers argued Uber made it onerous for them to opt-out of the arbitration provisions. The lawsuit posed a threat to Uber as it grew to represent as many as 385,000 drivers in California and Massachusetts after a San Francisco judge granted class-action status.

The settlement, which requires a judge's approval, was filed late Monday in San Francisco federal court and confirmed by Shannon Liss-Riordan, who represents drivers in the San Francisco lawsuits and settled with the ride-share company.

"Uber has an arbitration clause which it very rigorously enforces," Liss-Riordan said. "It's a myth that these opt-out provisions in arbitration clauses really make these agreements voluntary." Liss-Riordan said she'll be seeking attorneys fees of $5 million.

Uber spokesman Matt Kallman didn't respond to an email after regular business hours seeking comment.

Even before the appeals court ruling, prospects for the suits against Uber were dealt a blow by a U.S Supreme Court decision last year, which bolstered the power of employers to force workers to use individual arbitration instead of class-action lawsuits.