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In April, it looked like a high-profile lawsuit against Uber was going to be resolved after the high-flying startup agreed to pay up to $100 million to settle allegations that its treatment of drivers violated labor laws.
Today, US District Judge Edward Chen said the deal “is not fair, adequate, and reasonable,” and he won’t countenance it.
In a 35-page order (PDF) he slammed the deal, which would have required Uber to pay $84 million and up to an additional $16 million contingent on whether Uber’s IPO hit certain price points.
After some complicated back-and-forth about Uber’s arbitration agreements, Chen was overseeing a case with a class of more than 240,000 California drivers and just over 60,000 Massachusetts drivers.
In addition to payments ranging from $12 to $1,950, drivers would have certain additional rights like explanations before being deactivated, more information about their star ratings, and an internal process for drivers to complain about payment of certain fares.
It would also allow drivers in California and Massachusetts to ask for tips—although Uber made clear it would not add an in-app tipping function, and in fact the company dissuades riders from tipping.
The plaintiffs estimated that their claims for expense reimbursement, tips, and overtime that would be owed to employees totaled $854.4 million.
They also had claims under the California Private Attorneys General Act, or PAGA, that could have led to penalties of upwards of $1 billion, but plaintiffs’ lawyers told the judge “there would be a substantial risk of no recovery on this claim.”
Chen weighed the risk to both sides. Lawyers representing the driver plaintiffs could have lost a jury trial on all their points; at the same time, Uber also faced substantial risks if its drivers were found to be employees.
The judge concluded that a payment of $84 million was a reasonable way to settle the non-PAGA claims, even though that represented about a 90 percent discount of their possible value.
Together with some non-monetary relief, this “could well render a settlement… fair and adequate,” Chen concluded.
However, he wasn’t ready to dismiss the PAGA claims as well, which accounted for a mere $1 million in the settlement. “Plaintiffs propose settling PAGA for only 0.1 percent of the potential verdict value,” Chen wrote.
The judge had invited California’s Labor and Workforce Development Agency (LWDA), which handles PAGA claims, to weigh in on the settlement, and the agency didn’t think much of it. LWDA said there was “no rationale” for a $1 million settlement of such a potentially huge chunk of worker claims.
Now, the parties will have to convene and decide what to do next. One possibility is to come back with a deal that the judge approves of; otherwise, they can continue to litigate and push towards a trial.
Chen has scheduled a status hearing for mid-September.
“The settlement, mutually agreed to by both sides, was fair and reasonable,” an Uber spokesperson said in a statement. “We’re taking a look at our options.”
Lead plaintiffs’ attorney Shannon Liss-Riordan said she’s disappointed the judge did not approve the settlement, but glad he rejected most of the objectors’ arguments.
She said it has been routine for PAGA claims to be settled for a small fraction of their potential value, because such claims can “theoretically be enormous.”
“In light of this order, we will have to see what happens next,” she wrote to Ars in an e-mail. “It is possible the parties could reach a revised settlement that satisfies the court’s concerns regarding the PAGA claims.
But if not, as I’ve said before, I will take the case to trial and fight my hardest for the Uber drivers.”
Uberreader comments 30