Federal judge rejects Uber’s $100 million class action settlement, saying claims could run as much as $1 billion
On Thursday U.S. District Judge Edward Chen rejected Uber’s proposed $100 million settlement, saying that it doesn’t place enough value on the claims Uber drivers could bring under California labor laws if a court did determine they were employees, not independent contractors.
The heart of the issue
At the heart of this case is the issue of employee classification, specifically whether or not the Uber drivers who are part of the class action lawsuit were incorrectly classified as independent contractors when they were actually employees. The problem of employee classification is not unique to Uber – companies across all industries and of all sizes use independent contractors, and understanding the differences between independent contractors and employees can be a tricky business, one that regulators are highly aware of. In FY 2015 alone, employee misclassification investigations conducted by the Wage & Hour Division of the U.S. Department of Labor resulted in more than $74 million in back wages being awarded to more than 102,000 workers.
So what is an independent contractor?
While there’s no one single definition of an independent contractor, widely accepted legal definitions explain independent contractors are workers who individually contract with an employer to provide specialized or requested services on a project or as-needed basis, but who are not employees. When it comes to evaluating claims of misclassification, investigators examine the relationships between employers and workers who are classified as independent contractors.
What’s next for Uber?
The rejection of the settlement essentially leaves Uber with two options: increase the amount of the settlement, or proceed with the trial and risk a jury verdict that could end up costing the company billions (yes, billions) in additional wages.
Want to learn more about the differences between independent contractors and employees? Make sure to check out the recap of one of G&A Partners’ recent HR webinars: Employees vs. Independent Contractors, presented by Anu Mannathikuzhiyill, PHR, an HR Generalist for G&A Partners
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