Uber’s $100M Deal With Drivers Questioned

SAN FRANCISCO (CN) — A federal judge on Thursday refused to approve a proposed $100 million settlement between Uber and a class of 350,000 drivers, until both sides explain where they got their numbers.

Following three years of litigation, attorneys for Uber and a group of California and Massachusetts drivers presented the $100 million deal to U.S. District Judge Edward Chen at a hearing earlier this month.

The proposed settlement reimburses drivers for vehicle and gas expenses, gives drivers more rights and representation and releases Uber from any claims related to allegedly misclassifying drivers as independent contractors.

Under the deal, Uber would make $84 million available for payouts to drivers, along with an extra $16 million contingent on Uber increasing its value by 150 percent through an initial public offering.

In a ruling issued Thursday, Chen said both sides must explain how they arrived at certain figures and clarify language in the agreement before he will endorse the deal.

The proposed agreement does not clearly release Uber from all claims stemming from drivers being misclassified as independent contractors, Chen wrote in his 16-page ruling. Instead, the deal would ambiguously free Uber from all claims "based on or reasonably related to claims asserted in the action."

Chen also found that an estimated $2.4 million value for unpaid overtime wages lacked evidence to support that figure.

"The parties do not provide sufficient information on what numbers were used to calculate this value, the factual basis for these numbers, and how they resulted in the $2.4 million valuation," Chen wrote.

He said both sides also neglected to address concerns raised by objectors who complained the deal would release Uber from all claims related to misclassifying drivers without clearly estimating the value of those claims.

For instance, the deal frees Uber from liability over allegations it failed to provide meal and rest breaks for drivers, but neither side specified how much that claim would be worth if the plaintiffs prevailed at trial.

Another major problem with the deal is that the class accepted a 99.9 percent cut in claims under California's Private Attorneys General Act, which allows aggrieved employees to make companies pay penalties for violating labor laws.

Under PAGA, the state receives 75 percent of the penalties while employees get 25 percent.

Calculating the penalties at $100 per driver per wage period and $200 per driver per wage period for subsequent violations, the class arrived at an estimate of more than $1 billion. Still, that number did not take into account potential extra penalties for claims on tips, expense reimbursement, minimum wage, overtime wages and workers' compensation.

The parties failed to cite any substantial legal authority to justify the court accepting a deal in which the class gets 99.9 percent less for the PAGA claims than it might recover if successful at trial, Chen wrote.

Chen issued a separate order on Thursday inviting California's Labor and Workforce Development Agency to weigh in on the proposed settlement deal.

Uber attorney Theodore Boutrous did not immediately return a phone call seeking comment on the judge's ruling Thursday afternoon.

Lead class attorney Shannon Liss-Riordan declined to comment on whether the class could prove the estimated value of certain claims, but said she and her colleagues "look forward" to answering the judge's questions.

"The judge asked us a number of questions, and we will answer them as requested," Liss-Riordian said.

Chen gave both parties until July 15 to submit supplemental briefs to answer his questions on the proposed deal.

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