Uber, the immensely popular ride-hailing company, recently announced that as a result of two lawsuits filed by company drivers, a settlement has been reached which includes extreme policy change and a company payout of over $84 million. Many Uber drivers had been clamoring to be recognized as full-time employees rather than independent contractors in the hopes of obtaining additional benefits. Uber argued that the drivers should remain as contractors so that they can be their own bosses.
The settlement allows Uber to continue to classify drivers as contractors, but the drivers were awarded some policy concessions that should improve the overall performance and efficiency of the service. In addition to the payout to drivers, Uber also agreed to allow drivers to solicit tips and create “drivers associations” and to provide them with more information before and after possible termination from the company. Drivers will also be able to appeal their termination in the future under the conditions of the settlement.
While the lawsuit did not end the way the drivers had wished, the benefits for them are clear. While drivers may not earn full-time wages, their earnings will increase significantly, as passengers will now be aware that tips are not included in the initial fare. Drivers will also have a more powerful way to voice their concerns under these new policies. If necessary, the appeals process for termination will come at Uber’s expense and will be heard by a panel of highly rated Uber drivers. Fellow Uber drivers will meet quarterly to discuss their concerns and how to improve the quality of the service, ensuring that most drivers’ needs are being met by the company. While drivers will not gain the wages or benefits of full-time employees, they will receive some improvements in their situation.
Given that Uber’s website has the idea of “earning money on your schedule” plastered all over it, the drivers got just about all they could have hoped for. The concept of this service is not meant for full-time employees. This is not a traditional taxi service that buys a plethora of vehicles and hires drivers to circle a city looking for passengers. The reason Uber has been so successful is because virtually anyone can sign up to drive whenever they want to make some extra money, benefitting all parties involved. This means that the company doesn’t have to pay unnecessary sums of money for drivers and vehicles that are not maximizing their potential usage. The passengers are able to easily coordinate with a driver to navigate them from one point to another. They can easily find drivers because of the large number of contractors that exist within the current system. If Uber had to hire drivers as employees, then there would not be nearly as many drivers available at the click of a button, reducing convenience and efficiency. With the driving privileges available to virtually anyone, there are plenty of drivers to accommodate any amount of passengers. The drivers can decide whether they want to drive or not and earn more money the more they work. If they choose not to drive or work as many hours, they have that flexibility afforded to them.
Despite paying out about $100 million to drivers, the settlement is still a major victory for Uber because it retained the right to label drivers as independent contractors. This allows the company to continue its efficient system as an innovative ride-hailing service.
In addition, if the workers are not happy with their pay as contractors, then they are not forced to solely drive for the company. They could go out and get a day job while still driving for Uber at night. Uber is designed to accommodate drivers whenever there are passengers who need a ride. The courts made the right decision on this settlement because Uber was initially designed as a contractor service. The “drive as you please” system is appealing to many drivers and that is the reason Uber has gained so much popularity. Forcing the company to recognize drivers as employees would undermine the core concept of Uber. Ultimately, both sides came away with victories in the settlement, and Uber will likely continue to grow and succeed as an innovative shuttling company.
Connor Yahn ’18 (yahn1@stolaf.edu) is from Longwood, Fla. He majors in Economics.
