Uber Settlement With Drivers Blocked By Judge

Harry here.  June was one of the blog’s best traffic months ever and we came in at over 600,000 page views, so thank you to everyone who’s been supporting and reading the blog, I really appreciate it!  If there’s anything I can help you with, please don’t hesitate to reply to this e-mail and I’ll do my best to help – even if you just need to vent or want to say HI 🙂

Today, RSG contributor John Ince takes a look at the latest ruling in the Uber CA/MA employee lawsuit, goes into a deep dive into all of the lawsuits Uber is facing, and gives us a good look at the true earnings of an Uber driver by BuzzFeed.

This week's roundup covers the latest Uber ruling, Uber's lawsuits, and gives us a good look at the true earnings of an Uber driver by BuzzFeed

Uber Settlement With Drivers Blocked By Judge

Sum and Substance: A federal judge withheld approval Thursday of a settlement of $84 million to $100 million for hundreds of thousands of Uber drivers in California and Massachusetts and questioned whether the deal would compensate drivers adequately for the claims they were giving up. 

U.S. District Judge Edward Chen of San Francisco did not definitively reject the agreement, negotiated by a lawyer for plaintiffs in a class-action suit against the ride-hailing company, and said he might ultimately find it to be fair and reasonable based on further information or changes in some of its terms. But he said the parties to the settlement had failed to address arguments by objectors — groups of dissident drivers and their lawyers — who said they were being short-changed. 

Chen said one claim — that Uber had violated California labor laws by classifying drivers as independent contractors rather than employees, denying them overtime, work expenses and other benefits — could be worth $1 billion or more if the drivers went to trial and won employee status. The state would be entitled to three-fourths of any labor law penalties, which were valued at $1 million in the proposed settlement. 

“The parties should provide more substantial legal authority for why a 99.9 percent discount (in the labor penalties) is warranted,” Chen said. He also said the two sides had assigned no value to claims in other lawsuits — seeking payment for meal and rest breaks, waiting times between rides, and the denial of workers’ compensation benefits — that would be dismissed if the settlement were approved. 

The suit, filed on behalf of 385,000 Uber drivers in the two states, challenged Uber’s classification of them as contractors. The settlement would not affect that status, which could be disputed in future cases. Chen asked for further information from all sides, including a state labor agency, by July 15 before deciding whether to approve the settlement or send the case to trial.

His ruling comes a week after another federal judge gave preliminary approval to a similar agreement providing $27 million to 163,000 Lyft Inc. drivers in California.

My Take:  No surprise here.  Judge Chen had been giving indications for months that he wasn’t happy with this settlement.  This just formalizes his concerns and gives some specificity to his thinking.  The question now is, “what next?”  The two sides have to get together again and come up with something that might pass muster with the judge next time around.  The fact that Judge Chen suggested Uber’s potential violation of California labor laws would be worth over $1 billion suggests that a final agreement may be just too expensive for Uber to accept, and we still might see this case go to trial. Now that would be something to watch.  Grab the popcorn folks… Uber’s legal troubles are just beginning (See story below.)

Uber Battling More Than 70 Lawsuits in Federal Courts

Sum and Substance: “It’s the personality of the early team,” he said, “which is very much ‘we’re going to dominate the world, and we’re going to ask for forgiveness rather than asking for permission.'” And as the company [Uber] puts out one fire after another in court, it’s also battling unfriendly regulations in places like Austin and struggling with criminal charges overseas. 

The company is fighting more than 70 federal lawsuits in courts across the country and has resolved at least another 60, according to a search of a national database of federal court cases. And that doesn’t include actions in state courts. Uber was sued 46 times in federal court this year alone. Airbnb, the next most valuable U.S. startup, racked up six lawsuits during that time. Lyft, Uber’s chief competitor, faced seven and Facebook had 27. 

Uber has been hit disproportionately hard in court, but that’s hardly surprising, Sundararajan said. Part of the problem is Uber’s lukewarm relationship with its drivers — which the company is trying to change with perks like its recently launched quasi union in New York City. But the courtroom showdowns could become an issue for 6-year-old Uber as it continues fundraising, said Paul Boyd, managing partner at ClearPath Capital Partners. Even Uber, with its breakneck growth and massive war chest, isn’t immune to the power a lawsuit has to taint a company’s image.

“It will make investors question,” Boyd said. So far, the company hasn’t faced any devastating legal losses. Uber dodged what could have been a major blow in April when it reached a settlement worth up to $100 million to resolve claims that its drivers were entitled to employee benefits such as overtime pay and reimbursement for expenses. (See Above Story) The deal, which is awaiting approval from a San Francisco federal judge, allows the company to avoid a high-profile trial and the expense of reclassifying its drivers as employees — a major win.

The ride-booking platform announced public settlements in at least six cases during the past year, agreeing to shell out up to $163 million. Those deals seem to represent a shift for the company, which originally made a show of fighting litigation tooth and nail, said Joshua Davis, associate dean for academic affairs at the University of San Francisco School of Law. “One possibility is that you’re seeing a kind of maturing of the company in a way,” he said. “That it is going from sort of a cowboy mentality, if you will, to more of the attitude of an established company.”

Uber also pays a massive in-house legal team. A LinkedIn search turned up nearly 50 members around the world, and the company’s website lists 24 openings in its legal department. Some lawsuits are backed by Uber’s enemies in the taxi industry, who cry foul because Uber doesn’t adhere to their regulations. Others target Uber’s driver background checks — some argue they are too lax; others claim they dig too deeply. The company also has been accused of failing to protect female passengers from being sexually assaulted by drivers, leaving driver information vulnerable to a data breach, and refusing to accommodate blind passengers’ service dogs. 

Despite the pending settlement for up to $100 million, the debate over whether Uber drivers should be employees or independent contractors is far from over. Lawyers have filed a string of follow-on suits, and the issue constantly crops up in seemingly unrelated cases.

Some of this litigation has the potential to do serious damage. An antitrust suit in New York, which accuses Uber of illegally fixing the prices its drivers charge instead of allowing them to compete with each other, could be worth more than $1 billion and seeks to upend Uber’s pricing model, Davis said. Depending on how the court receives the case, “Uber could be anywhere between just fine and in a whole lot of trouble,” he said.

My Take:  This is the best and most comprehensive article I’ve read on Uber’s ongoing legal battles.  The numbers speak for themselves – 70 lawsuits in federal courts pending, with another 60 already settled.  That doesn’t count state lawsuits.  Yes, Uber is a big target, with deep pockets.  But, as the article’s author points out, Uber often acts like a bully, and annoys a lot of people. This is the nature of disruption.  Only time will tell whether Uber’s approach worked.

Someone is watching your Uber driver

Sum and Substance: Ride-hailing service Uber will begin tracking personal driver behavior after a series of app updates, the company announced this week. Starting Friday in 26 cities, including New York, Los Angeles, Chicago and the District, the app will score drivers on how well they brake, if they accelerate smoothly, use their phone while driving, drive within the speed limit and more. 

Related: What to Make of Uber’s New Driver Tracking Features

Drivers will be notified in real time on the app’s interface if they exceed the speed limit or use their phone. After rides, they will receive ratings on their driving performance and a map highlighted where incidents such as hard brakes or fast turns occurred. 

The company said in its announcement that the changes are geared toward rider and driver safety. The alerts are rolling out one at a time across different cities. District drivers will see reports on phone movement and speeding, for example. New York drivers will see reports on speeding and abrupt stops and starts. 

Most poor driver ratings, Uber said, are because passengers criticize driver behavior. It hopes these report cards, issued daily, will help drivers improve their habits. The company will not use the data gathered to remove drivers from the platform and passengers will not be able to see the report cards. Commercial driving fleets, like limousine services and taxi companies, have used similar technology, called telematics, for decades.

My Take:  This is concerning to me. On the surface it smacks of Big Brother watching over you. It’s part of a much larger trend in the tech world where more and more data is being collected on people.  The people doing the collecting of the data can spin it as they wish, but we never know their true intentions. If one is inclined to take Uber at its word, then I suppose there is nothing to worry about here. But we’ve seen too many examples where Uber has been less than forthright.

One of our readers gave me an advance heads up on this story and offered a very interesting perspective. With his permission I’ve included parts of his take, “… increasing supervision and restrictions on conduct in any situation increases control, undermines the interest of the other party, and increases the probability of violations. It is the very diametric opposite of liberty, which brings about the best in people. Humans naturally do not like to be controlled, spied on, charged or manipulated. People perform much better when they are given freedom, wide discretion, and when given credit for success resulting from own initiative. In this case …Uber will be employing the new measures to terminate undesirable drivers for whatever reasons it could find under the vast guise of “safety” which has been widely abused and misused … Safety, deemed as a zero tolerance matter, will be the perfect pretext to dump any driver seen as a political threat to Uber. Also adopting more restrictive safety measures would serve as a marketing pitch to the gullible consumer who will be sold the same mediocre service along the safety niche.”

Uber Data And Leaked Docs Provide A Look At How Much Uber Drivers Make

Sum and Substance: BuzzFeed News examined a trio of spreadsheets, provided by a source who worked with Uber pricing data, that contain separate but related data on tens of thousands of trips taken in the Denver, Houston, and Detroit markets during two- or eight-week periods in late 2015.

Uber employees used these spreadsheets to evaluate potential outcomes of the very price cuts the company would ultimately implement in January 2016. These documents and the internal Uber communications associated with them offer an unprecedented look at the data on which Uber builds its business, and on which the company’s drivers build their livelihoods. Uber says it doesn’t know how much drivers on its platform actually earn per hour, after expenses. Still, Uber’s internal pricing models, found in the spreadsheets provided to BuzzFeed News, do generate rough estimates of driver net pay. But in internal communications seen by BuzzFeed News, Uber explicitly discourages employees from comparing these estimates to the minimum wage.

A BuzzFeed News review of the rough internal net pay estimates contained in the leaked documents determined that the models Uber used are highly abstracted and oversimplify certain key calculations. Rather than relying on Uber’s figures, BuzzFeed News conducted an independent analysis of the raw trip data and driver data. Uber subsequently recalculated BuzzFeed’s estimates using a broader and more detailed set of internal data — which it declined to share directly with BuzzFeed News.

The company did, however, conduct this recalculation according to BuzzFeed News’ methodology — which it said was “solid” — and did so in the presence of a BuzzFeed News editor and reporter. Based on these calculations, it’s possible to estimate that Uber drivers in late 2015 earned approximately $13.17 per hour after expenses in the Denver market (which includes all of Colorado), $10.75 per hour after expenses in the Houston area, and $8.77 per hour after expenses in the Detroit market, less than any earnings figure previously released by the company.

 My Take:  For drivers, these figures won’t be especially surprising, but passengers may be shocked.  This just underlines how successful Uber was at planting unrealistic expectations in the minds of the public.  Remember that Wall Street Journal estimate that a “typical” driver would make in excess of $100,000 a year?  Wow… it just shows how easily public perceptions are manipulated.  Buzzfeed did a nice job here of setting the record straight, but I suspect the earlier erroneous expectations will linger for a long time to come.

Readers, what do you think of this week’s stories?

-John @ RSG

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