In this week’s article we examine the proposed settlement reached by Uber in “a pair of class-action lawsuits in California [O’Connor v. Uber Technologies, Inc., Case No. CV 13-03826-EMC] and Massachusetts [Yucesoy v. Uber Technologies, Inc., Case No. CV 13-03826-EMC] that will let Uber continue to categorize drivers in those states as independent contractors-a landmark agreement that could have lasting implications for the long-term viability of the ride-hailing service” [Isaac & Scheiber, Uber Settles Cases With Concessions, but Drivers Stay Freelancers, nytimes.com (4/21/2016)]. In addition, we examine criticism of the proposed settlement from some drivers and their attorneys.
Travel Law Update
In Chen, A Traveler’s Guide to Taking a Smartphone Abroad, nytimes.com (5/25/2016) it was noted that “The summer travel season will soon be upon us, with notions of escape, unplugging and faraway lands. But while the idea of disconnecting from technology when abroad seems relaxing, the stress of visiting a foreign country without a smartphone connection can quickly counteract the benefits of a digital detox. After landing in an unfamiliar place, you may realize that an inability to look up mobile maps or places to eat on a phone can be crippling. Relying on a printed tourist guide may feel primitive and immediately inform muggers that you are holding lots of cash. So what to do? There are two ways to take your cellphone abroad and get data-the frugal way and the pay-full-price way. The inexpensive method involves some tinkering and planning ahead, while the full-price way is easy but requires paying even more money to your carrier”
Travel Law Article: The Uber Proposed Settlement
The Notice of Motion and Motion for Preliminary Approval dated April 21, 2016 [the Notice] sets forth the following, in part:
“This case was filed on August 16, 2013, on behalf f individuals who have used the Uber software application as drivers, alleging that drivers have been misclassified as independent contractors and thereby denied reimbursement of their necessary business expenses under Cal. Labor Code 2802. Plaintiffs also brought a claim under Cal. Labor Code 351… alleging that Uber has advertised to its customers that a gratuity is included n the fare, but Uber does not remit any such gratuity to the drivers”.
The Proposed Settlement
“The monetary component of the Settlement provides for a non-reversionary Settlement Fund in the amount of $100,000,000 of which a payment of $84,000,000 is guaranteed and as additional $16,000,000 is contingent on an Initial Public Offering (IPO) of Uber yielding an average valuation of at least 1 ½ times Uber’s most recent valuation over a 90-day period at any point within 365 days from the closing of the IPO, or if a Change in Control of Uber within three years of the date of final settlement approval yields a valuation of at least 1 ½ times Uber’s most recent valuation”.
The Settlement Fund
“This Settlement Fund, less costs of claims administration, attorney’s fees and costs, and class representative enhancements (Net Settlement Fund) will be distributed to Class Members pursuant to a plan of allocation…based on a formula that reflects the proportionate value of class members’ claims, considering the following factors: (1) whether they drove in California or Massachusetts; (2) if they drove in California, whether they are a member of the certified class in O’Connor; (3) whether they opted out of Uber’s arbitration clause; and (4) the number of miles drivers have transported Uber passengers (i.e., ‘on trip’ mileage”.
California & Massachusetts Drivers
“The formula divides the allocation between California and Massachusetts drivers pursuant to Plaintiffs’ calculations of the relative values of the claims of these settlement classes, with ½ credit given for the Massachusetts drivers’ reimbursement claim 9as compared to the California drivers’ claim). With respect to the settlement funds allocated to California drivers and Massachusetts drivers, the formula distributes payments based upon the amount of miles driven with a passenger in the car. For California drivers, the formula allocates double weight for drivers who are members of the certified class (as compared to drivers who were excluded from the class), in recognition of the stronger claims of these drivers on the reimbursement claim, as well as the much greater likelihood of these claims being pursued, given that they had been included in a certified class. The formula also allocated double weight for drivers who opted out of Uber’s 2013 and 2014 arbitration clauses (effecting their greater chance in the class in this case”.
The PAGA Claim
“In addition, $1,000,000 will be set aside for the Private Attorneys General Act (PAGA) claim, of which $750,000 will be aid to the State of California and $250,000 will be included in the gross settlement fund for California drivers”.
Cy Pres Distribution
“If, following the second (attempt to distribute the settlement funds to class members) they are any remaining funds that have not been able to be distributed (i.e., from whom the electronic payment information is invalid and the administrator is not able, with reasonable attempts, to locate the class member to obtain undated information, or checks continue to remain uncashed) such funds will be distributed to the parties’ agree-upon cy pres beneficiary, the Legal Aid Society-Employment Law Center (for any remaining unclaimed funds our of the California settlement pool) and Greater Boston Legal Services (for any remaining unclaimed funds out of the Massachusetts settlement pool). This settlement is non-reversionary, meaning that no funds from the settlement including unclaimed funds, will revert to Uber”.
Changes In Business Practices
“In addition to monetary compensation, Uber has also agreed as part of this settlement to implement the following forward-looking changes to its business practices in California and Massachusetts:”
“(1) Uber will institute a ‘Comprehensive Deactivation Policy’, which provides that drivers may only be deactivated for ‘sufficient cause’ and will not be deactivated at will. Drivers will be given at least two warnings prior to any deactivation (except for reasons of safety, fraud, discrimination or illegal conduct) and will be given a reason for any deactivation in writing. Furthermore, Uber will publish its deactivation guidelines so that drivers have more transparency regarding the exact contours of Uber’s rules and policies regarding deactivation…”.
“(4) Except for deactivation based on safety issues, discrimination and fraud or illegal conduct, drivers may pursue arbitration to challenge their deactivation, and Uber will pay for the arbitration fees….(5) Uber will also pay the arbitration fees for any challenges brought by the drivers against Uber in which drivers allege an employment relationship…”
“(7) Uber will provide additional information to drivers about their star ratings and their rankings relative to other drivers and will provide more clarity about what customer ratings thresholds a driver must maintain in order to increase clarity and transparency for drivers”.
The Driver Association
“(8) Uber will fund and facilitate te creation of a ‘Driver Association’ in California and Massachusetts, through which drivers will have the opportunity to elect driver leaders who will meet quarterly with Uber management”.
“(9) Finally…Uber has agreed to make good faith efforts to clarify its messaging regarding tipping, clarifying on its website and in communication with drivers and riders that tips are not included on Uber’s platforms (with the exception of Uber TAXI) and that tipping is neither expected nor required. Moreover, Uber has confirmed that its policies do not prohibit a driver from putting up signs or requesting a tip”.
“In exchange for these monetary and non-monetary concessions, drivers in California and Massachusetts will release all wage and hour claims that have been brought against Uber in these two states. Except for the named plaintiffs, the release does not provide for release of claims unrelated to the core misclassification allegation, e.g., claims for discrimination, wrongful termination, personal injury, etc.”
“While the agreement does not require Uber to reclassify drivers as employees, it will provide significant benefits and added protections to drivers that they do not currently have, require significant changes to Uber’s business practices, and provide substantial monetary relief, which will be proportional to the strength of class members’ potential claims”.
Criticism Of The Proposed Settlement
In Hancock, Uber Settlement Blasted by Plaintiffs Lawyers, Drivers, The Recorder (May 13, 2016) it was noted that “Boston plaintiffs’ attorney Shannon Liss-Riordan has spent the past three years pummeling Uber over its labor practices. Now she’s the one with a target on her back. In the days since she reached an $84 million settlement to end California and Massachusetts labor lawsuits against the company, Liss-Riordan has gotten a shellacking from other plaintiffs attorneys. Some have complained the settlement would wipe out their own cases. Others say she sold out her own clients on the cheap, and want to wrest her Uber…cases out of her hands. This past week, plaintiffs’ lawyers Mark Geragos and Brian Kabatack stepped in to join fellow Los Angeles attorney Christopher Hammer in filing a formal request with the court to remove Liss-Riordan as class counsel-at least for her California cases. They argued that the fact that she settled for just $84 million when her own estimate showed the cases to be worth $852 million warrant her ouster”.
Uber Driver Feels “Betrayed”
In Hancock, Lead Plaintiff Spurns Uber Settlement, The Recorder (5/16/2016) it was noted that “The driver who served as lead plaintiff in a California class action against Uber…on Monday said he feels ‘utterly betrayed’ by the $84 million settlement and accused his lawyer of pressuring him to sign on before he understood the details. Douglass O’Connor, a San Francisco Uber driver, submitted a formal declaration to the court objecting to the settlement and requesting to withdraw his consent. He says that lead plaintiffs attorney, Shannon Liss-Riordan…pushed him to sign the deal before he understood all that it would entail”.
Uber Drivers Lawyer Fires Back
In Lawyer for Uber Drivers Fires Back to Critics, The Recorder (5/20/2016) it was noted that “In a formal response to the settlement’s objectors filed with the court, Shannon Liss-Riordan…took digs at both the qualifications and motivations of fellow plaintiffs’ attorneys who have called for her to be thrown off the case against Uber…’Notably, some of the loudest objections to this settlement come from lawyers who do not practice in this field (independent contractor misclassification, wage and hours law or even employment law) including a ‘celebrity lawyer’ and other attorneys whose practice areas focus on products liability and personal injury’…’Now, these lawyers have jumped into te fray to second guess counsel’s careful decision-making. Some might suggest that they have done so out of their own self-interest, since no reasonable attorney could seriously argue that a $100 million settlement, in the face of multiple risks that could mean recovering nothing, is inadequate’”. Stay tuned.
Justice Dickerson has been writing about travel law for 39 years including his annually updated law books, Travel Law, Law Journal Press (2016) and Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. Justice Dickerson is also the author of Class Actions: The Law of 50 States, Law Journal Press (2016). For additional travel law news and developments, especially in the member states of the EU, see IFTTA.org.
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