Uberhas agreed to pay up to $100 million to settle a class-actionlawsuitwhich resolves a major challenge to its business model by allowing the ride-hailing service to keep its California and Massachusettsdriversasindependentcontractors.
Thelawsuithad claimed thatUberdriversare employees and thus entitled to reimbursement of expenses.
The case againstUberhad been closely watched in Silicon Valley, as other companies in the on-demand tech economy shareUber's reliance onindependentcontractors. The class action had been scheduled for a trial in San Francisco federal court in June.
"We realize that some will be disappointed not to see this case go to trial," said Shannon Liss-Riordan, an attorney fordrivers.
However, Liss-Riordan said the plaintiffdriversfaced significant risks of losing if the case moved forward, particularly because a federal appeals court had recently agreed to review an order allowingUberdriversto sue as a group.
Nothing about the settlement prevents a future court, or U.S. labor authorities, from deemingUberdriversas employees, she said in a statement.
Out of the $100 million proposed payment, $84 million is guaranteed todrivers.Ubercould also pay an additional $16 million, but only if the company's valuation grows by 150 percent above its December 2015 financing round within a year after any initial public offering.
Uberwas valued at $62.5 billion in that December funding round.
Uberagreed to some changes in its business practices, including the institution of a policy for deactivation ofdrivers, chief executive Travis Kalanick said in a blog post about the settlement. Somedrivershad long complained thatUberarbitrarily terminated users from its platform.
Uberis "pleased" that the deal "recognizes thatdriversshouldremainasindependentcontractors, not employees," Kalanick said in the post.
The company also agreed to help create adrivers' association in both states. Liss-Riordan said that while such groups are not officially a union, they can act like a union in bringing grievances to management's attention.
The settlement is similar to a separate agreement announced with Lyftdriversearlier this year, though theUberagreement is much larger given thatUberhas many moredrivers.
Over 450,000 U.S.driverscurrently use the app each month, Kalanick said in the blog post.
TheUberdeal must be approved by U.S. District Judge Edward Chen in San Francisco.