The company that revolutionized the way we all catch a ride will settle its largest legal threat to business — and it’ll cost them $100 million dollars.
#UBER, the car service that is accessed through a mobile application, allowed independent contractors to use their personal vehicles for car service. Because UBER essentially brokered the deal, a small portion of each ride was contributed to UBER. By most accounts, this made the drivers of UBER independent contractors- which means they weren’t necessarily employees, but rather (in UBER terms) partners. As independent contractors, drivers were responsible for business/operating costs (i.e. gas, maintenance, insurance). This also meant that UBER didn’t have to provide health insurance or pay the minimum wage required by law. This saved UBER almost 30% in labor costs. For the past two years, UBER has been in a legal battle over their current business model.
However drivers in California and Massachusetts aren’t buying the “independent partner” phrase. Drivers in these states felt as though they were employees without employee benefits. UBER could deactivate and terminate drivers with little to no grounds; a major concern for those who “partnered” with the company. The drivers were granted class –action status by a California federal judge last September. In an effort to minimize the potential pay out, UBER has offered $100 million dollars to those drivers in the aforementioned states. The settlement is pending approval by US district court judge Edward Chen with a hearing date as early as June 2.
UBER will pay a guaranteed $84 million dollars to drivers in those states. UBER will hand over $16 million, should it go public, and within a year of its IPO, multiply its valuation by 1.5 from its 2015 fourth-quarter figure of $62.5 billion.
*Inserts cash register sound*
On average, each of the frequent drivers for UBER (25,000 + miles) could receive upwards of $8,000. Also, UBER has implemented a protocol for deactivation and the termination of its partners.
