SAN FRANCISCO -- Uber will pay up to $100 million to drivers who had sought to be classified as employees, settling two lawsuits that posed a threat to the company's on-demand business model, which relies on independent contractors.
The San Francisco ride-hailing company announced it will pay an initial sum of $84 million to settle cases in California and Massachusetts to some 385,000 drivers. Uber, which is valued at $62.5 billion, said it will pay the drivers an additional $16 million if the company's valuation reaches 1.5 times its current value after it goes public or if it gets bought.
The company also agreed to policy changes that reduce its control over drivers, shifting to be more in line with an independent contractor relationship.
The settlement brings to a close what employment experts believe was the biggest existential threat to the fast-growing startup. Uber built its high valuation on a system that uses independent contractors, enabling the company to avoid covering driver expenses such as gas and mileage, or providing benefits such as health insurance, Social Security, overtime or sick days. Recognizing its drivers as employees would have bitten into its margins -- and potentially slowed its global expansion and raised fares.
Plaintiff attorney Shannon Liss-Riordan brought the lawsuit against Uber and 11 other on-demand companies that use similar models (those companies are not included in the settlement). The case against Uber in California was filed in 2013; drivers in
the Massachusetts case filed their suit in 2014.