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Court rejects Uber’s proposed $100 Mn settlement of a class action lawsuit

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Well, money can’t really solve all problems. Even when its Uber with all its massive coffers attempting to sort out issues. A federal judge rejected a proposed $100 million settlement brought in by Uber, for a class action lawsuit regarding the classification of its drivers as employees rather than contractors.

The case stems from confusion regarding the status of Uber drivers –are they actually employees or contractors? Uber believes them to be contractors while the drivers themselves look upon them as employees. Why? Well, because being an employee of a firm also has a whole bunch of other associated benefits as well. A company has responsibilities to its employees that it doesn’t to people it has contracted to work for them, for example social security, health insurance, paid sick days, overtime etc.

Well, a group of 385,000 Uber drivers have been clamoring for classification as employees, stating that they were entitled to expenses. There have been significant tussles involved between the company and its employees over the issue, after a group of drivers threatened the company with a class action lawsuit. Obviously, Uber can’t have that as it would mean changing the very model its business operates and has been built upon.

Uber has been attempting to sort the matter out of court and towards that end, is proposing a $100 million settlement. Should the drivers accept this settlement, Uber wouldn’t be responsible for all sorts of costs and the usual structure of its business would be maintained. However, the $100 million settlement was deemed as inadequate by court after a section of drivers lodged multiple complaints with the courts.

Well, the courts appear to agree with the drivers. According to US District Court Judge Edward Chen for the Northern District of California, the settlement was deemed as both inadequate and unreasonable.

According to Uber,

The settlement, mutually agreed by both sides, was fair and reasonable. We’re disappointed in this decision and are taking a look at our options.

A part of the problem may also have stemmed from the fact that Uber had put certain restrictions on the amount it had agreed to pay out. Apparently, $16 million would be paid out only if the company decided to go public and its valuation increased one-and-a-half times from its December 2015 valuation within the first year of going public. So yeah, simply too many variables to be taken into consideration.

Meanwhile, we expect Uber to solve the issue by increasing the amount of money on the table until it reaches a value that satisfies all the different parties involved. The company’s chief rival Lyft had to deal with similar issues, and the company eventually took care of the problem by doubling the amount it was initially offering to its drivers.

A bibliophile and a business enthusiast.

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