SAN FRANCISCO (Legal Newsline) – When a federal judge rejected Uber’s $100 settlement offer, it looked like a big loss for the ride-sharing company. Now it looks like it might have been the best thing that could have happened to Uber.
The ride-sharing company was facing a lawsuit against its workforce that felt it was improperly classified as independent contractors rather than as Uber employees. The class action lawsuit, filed in California, covered approximately 240,000 current and former drivers who wanted extra compensation that included expense reimbursements and tips.
Uber had reached a preliminary $100 million settlement with the plaintiffs; $84 million guaranteed and $16 million on the condition the company’s value continued to grow through an initial public offering.
A federal court judge rejected the settlement; it was deemed, “not fair, adequate and reasonable."
“In a typical case when a court rejects a settlement of this magnitude, it would be quite typical for parties to continue try to hammer out an agreement,” Fisher Phillips (Portland) partner Rich Meneghello told Legal Newsline.
“They’d use the judge’s words as a blueprint for success, find out what it is that he or she was not satisfied with regarding the settlement and then adjust accordingly. Often times, it’s a matter or upping the value of the monetary value of the settlement and adjusting how the class would be paid.”
A rejection like this one could have spelled bad news for Uber. The $100 million proposed settlement was a small price to pay compared to the $850 million the legal claims are valued at.
However on Sept. 7, Uber won a case at the U.S. Court of Appeals for the Ninth Circuit, which ruled its original arbitration agreement is valid. The ruling will most likely drop the number of plaintiffs Uber will face from 240,000 to about 8,000.
This will not only drive down the value of the case, but also all but eliminate leverage the plaintiffs have over Uber.
“It’s hard to know what’s going to happen. If the sides are going to continue to try to negotiate, will Uber use this as leverage and try to get a much smaller settlement or at least a settlement now that was around that same level which could be seen by the judge as being more fair?” Meneghello said.
“Or, will Uber recognize that the value of the case isn’t as high anymore, roll the dice and try to litigate it and recognize that the size of the payout will not nearly be the same size?”
Whatever Uber decides to do from here, one thing is clear - the Ninth Circuit win was big for Uber, along with any other company that’s in the “Gig Economy," according to Meneghello.
“(Uber’s) arbitration agreement is one that’s very similar to a lot of gig economy companies in that a lot of times they set up people who do work for them with just a ‘click here’ on massive terms, use agreements and that sort of thing,” he says.
“Often times they include arbitration agreements with class waivers like this one did and that’s one thing the judge didn’t like about it - that it was just buried in this term of service and maybe some people wouldn’t have read or understood it.
“(However), the court upheld it as other courts have. This is a boost, not only for Uber, but for all gig economy employers and gig economy companies that use arbitration agreements with their employees and their independent contractors."