Uber Deal Offers Drivers $1 Each to Wipe Away Labor Threats Valued in Billions

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  • California’s 1.6 million drivers would share $1.7 million
  • Drivers’ lawyer said in June penalty could be ‘staggering’

How Uber and Airbnb Bent Laws and Made Billions

Uber Technologies Inc. reached a settlement offering its drivers an average of about a buck apiece to dispense with alleged labor-code violations that their lawyer claimed might have been worth billions of dollars.

The ride-hailing company, along with the drivers’ lawyer, asked a state judge in Los Angeles Wednesday to approve a $7.75 million agreement to resolve claims stemming from its refusal to give California drivers the protections and benefits of employees. The accord allows Uber to keep classifying the drivers as independent contractors.

The claims by Steven Price, who sought to represent as many as 1.6 million California drivers in a class action, were brought under the state’s so-called bounty hunter law, which gives employees the right to step into the shoes of the state labor secretary to bring enforcement actions. Under the 2004 Private Attorneys General Act, or PAGA, the state keeps 75 percent of any penalties won. The remaining 25 percent is a reward for the workers who bring the case. Thousands of such lawsuits have been filed in the past 12 years.

The Price case poses a special threat to Uber. The company in September won an appeals court ruling that potentially eviscerated a more advanced class action in San Francisco federal court by forcing the vast majority of 385,000 California and Massachusetts drivers in the case to proceed through arbitration one at a time. But PAGA claims, like those filed by Price in state court, can’t be shunted into arbitration.

Christopher Morosoff, a lawyer representing Price, said at a June hearing in San Francisco that his case cited 17 labor code violations, compared with just two claims -- tips and mileage -- in the federal case for which the PAGA penalties were estimated at $1 billion by the state agency that oversees labor code enforcement.

‘Do the Math’

“Do the math there,” he told U.S. District Judge Edward Chen at the time. “The numbers may be staggering, and they may be in the billions, and you may not want to look at them, but they are real.”

In Wednesday’s filing, Morosoff and attorneys for Uber urged the Los Angeles judge to approve the accord, calling it a “reasonable and fair compromise” and “the largest PAGA settlement ever, exceeding all other known PAGA settlements by millions of dollars.”

“This settlement appropriately balances the objective of the PAGA statute and the risks of litigation posed to each side, while avoiding an unjust result,” they wrote.

PAGA Penalties

After attorney fees and administration costs are deducted, the agreement provides for about $1.7 million to paid to drivers and earmarks about $2.9 million in PAGA penalties for California’s Labor and Workforce Development Agency. The amount each driver gets will depend on how many weeks they have actively driven for Uber.

An Uber spokeswoman said the company is pleased with the settlement and looks forward to resolving other cases. Morosoff didn’t immediately respond to a call seeking comment.

Uber said in a court filing that the Price settlement would resolve PAGA claims of drivers who used its app from July 8, 2013, until the date a Los Angles judge signs off on the deal.

Court approval of the accord isn’t a sure thing. In the San Francisco case, which would have resolved claims for tips and mileage valued by the drivers’ lawyer at $852 million, Chen rejected a $100 million settlement in August. He said the $1 million allotted to resolve PAGA claims was inadequate in light of those claims being valued at as much as $1 billion.

Overtime Claims

Shannon Liss-Riordan, the lawyer representing drivers in the San Francisco case, was criticized by Morosoff, who said she folded too easily to Uber in her settlement on minimum-wage and overtime claims, which the deal valued at zero.

Liss-Riordan, complaining that she was left in the dark about the Price settlement until it was first disclosed in November, tried unsuccessfully to get Chen to try to wrestle the PAGA claims away from the Los Angeles case so she could pursue them in San Francisco. Chen said in an order that he was reluctant to interfere “with a state court’s resolution of what is, after all, a state law issue.”

‘Forum Shopping’

Liss-Riordan said the Price settlement is evidence of Uber’s “forum shopping,” testing different courts to find the most favorable outcome.

“It is looking for a judge who will approve a far smaller settlement than I had last year, which the federal court declined to approve,” Liss-Riordan wrote in an e-mail. “Now Uber is trying to get a settlement approved in state court for a lower amount for the PAGA claims than Judge Chen said he would not approve, but without the drivers getting the benefit of the far larger settlement that I was able to negotiate.”

Charlotte Garden, a Seattle University associate law professor who has followed the Uber litigation, called the settlement a “bargain” for Uber, saying it appears to be proportionally smaller than the sum than Chen signaled that he would have approved in the San Francisco case.

The professor also said that if the Price settlement is approved, it will advance the company’s “divide and conquer” approach to driver lawsuits.

It may reduce the threat of the San Francisco lawsuit to the “nuisance value” of fighting potentially thousands of individual drivers in arbitration, she said. While that cost could still be considerable because Uber has committed to covering the expenses of arbitration, “it will almost certainly be less than a case with a viable path towards litigating all the drivers’ claims on an aggregate basis,” Garden said.

The Los Angeles case is Price v. Uber Technologies Inc., BC554512, California Superior Court, Los Angeles County (Los Angeles). The San Francisco case is O’Connor v. Uber Technologies Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco).