April 22, 2016
The Uber Settlement is an Unstable Equilibrium and/or Collective Bargaining
Posted by Matt Bodie

Uber has settled two California class actions in which the underlying issue was their employee status.  The company will pay up to $100 million to the class of roughly 385,000 drivers and also provide a new process for "deactivation" that provides drivers with a voice in whether Uber takes them off of its platform.  There is a lot of great academic writing about Uber out there, and I hope to contribute to the lit soon, but at present I just wanted to flag two quick points:

  1. This "settlement" does not and cannot settle the ultimate issue of whether Uber drivers are employees or independent contractors.  As Shannon Liss-Riordan, the attorney representing the drivers in the suit (as well as a classmate of David and mine), said in a statement: "“Importantly, the case is being settled — not decided.  No court has decided here whether Uber drivers are employees or independent contractors and that debate will not end here."  I suppose this class of drivers is giving up their claims, but it's not preclusive to future drivers or the State of California or Massachusetts or the IRS, as far as I can tell.  So what exactly is Uber getting for its money?  These class claims are settled (if the court approves), but the issue remains open and will continue to generate potential claims down the road.  However, Uber does get a temporary litigation reprieve and a better relationship with its drivers.  Which leads to the second point . . . .
  2. This settlement really looks like a collective bargaining agreement. It provides the workers with:
    • additional pay (aka a settlement "bonus") based on miles driven
    • a peer-driven arbitration-like process for deactivation (aka termination)
    • an internal arbitration-like process for pay disputes
    • a notification that tips are not included in the Uber fee, and 
    • the facilitation and recognition of an Uber Driver Association who will bargain with Uber (or, in the works of the press release, "who will be able to bring drivers' concerns to Uber management, who will engage in good faith discussions (on a quarterly basis) regarding how to address these concerns")

   That last one really clinches it, no?  But if the drivers are not employees, then will this Driver Association be an unlawful restraint of trade?  Or will the NLRB find the drivers to be employees despite the settlement and then find that Uber has violated NLRA Sec. 8(a)(2) by providing assistance to a labor organization?  (Uber's CEO says the company "will help fund these two associations.")

Congrats to Shannon and the Uber drivers for pulling off what looks to be a real step forward for the drivers' relationship with the company.  But in my view, the settlement that seeks to confirm that drivers are not employees only ends up making them look even more like employees.

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