Who Is The Real Winner In The Uber $100 Million Class Action Settlement

Who Is The Real Winner In The Uber $100 Million Class Action Settlement

While Uber just settled two major class action lawsuits that were pending in California and Massachusetts to the tune of $100 Million Dollars, the settlement does not amount to much and really does not settle anything. This was the case that was supposed to knock Uber off the high perch it has sat on since its founding in 2009. $100 Million Dollars is a lot of money, but with billions in financing, this amount is a very modest price for Uber to pay to protect its business.

The thing is, the settlement does not really settle anything. By settling these lawsuits, Uber has forestalled any precedent being set on the question of whether Uber—and others in the so called “gig economy” has a legal obligation to classify its workers as employees.  A loss of a case like this would cost Uber billions of dollars, eroding its potential profitability and its supposed value.

The question of whether Uber drivers are independent contractors or employees centers largely on how much control the company exerts over them. The main difference is that if drivers are employees, then Uber has to pay drivers benefits like health insurance, paid time off as well as payroll tax and other large costs associated with benefits that employees are entitled to under the law.

The key question left unanswered by the settlement announcement is whether the drivers are receiving enough in return for what they're giving up. Nothing fundamental in the balance of income and expenses will change as a result of the deal. Uber drivers will still have to pay for gas, insurance and wear-and-tear on their vehicles, and Uber will retain the right to set fares and extract fees and commissions of more than 20%.

The settlement of these cases is a great deal for Uber because, at least for the moment, it removes what was plainly regarded as a massive threat to its business. Uber portrays the deal as a complete victory for drivers because according to Uber, drivers value their independence. This is yet another example of Uber’s press relations machine operating at full steam (blow hard steam).

The settlement agreement boils down to one thing: If a judge accepts the terms, Uber can still treat its drivers as independent contractors, in exchange for a few minor concessions that address some concerns that drivers had expressed throughout the case. The main part of the settlement that directly affects Uber riders is the company’s agreement to stop saying that the tip is included in the fare. Uber often discouraged its drivers from soliciting tips from passengers because the company argued the extra step made the experience much less seamless and thus less on-demand. But riders were never prohibited from tipping their drivers; they were just told they didn’t need to. This was done because Uber didn’t want riders to have to carry around cash. Uber’s saw its cashless, friction-free payment experience as a positive differentiator from yellow taxis. The settlement does not require Uber to add an in-app tipping feature which allows riders to add a tip to their electronic bill.

The biggest change for drivers, inside and outside of California and Massachusetts, is that they cannot be deactivated from the Uber platform for failing to accept a minimum number of ride requests. Previously, drivers would receive emails or other forms of communication warning that they would be deactivated/fired if they did not raise their acceptance rate to at least 80 percent of all ride requests.

Drivers in California and Massachusetts will see more minor changes. More specifically, certain drivers in these states will receive some money form the settlement and will have the right to a new appeals panel. Out of the $100 million settlement, $84 million is the first part of the settlement and If Uber goes public, it will have to pay $16 million more. The distribution of the money that drivers receive will be based on a number of factors, but regardless of the factors, the total amount to each driver will range from $24.00 to $8,000.00.

The most significant aspect of the settlement is that drivers in California and Massachusetts get to form an appeals panel, through which drivers can appeal the company’s decision to deactivate them, and a driver association that serves in the place of a union but will not be legally recognized as one. So while there will be a remedy when a driver believes they were wrongfully deactivated, Uber will ultimately have the final say.

In the end, the Uber settlement gives some drivers a few dollars as a one-time payout, but still leaves them working as Uber employees in all but name. Since these lawsuits had the potential to force real change, it is hard to see this as their victory. In essence, Uber just paid through the nose to buy labor peace in California and Massachusetts.

The settlement completely abandons the very point of the lawsuit. The lawyers for the Uber drivers have long framed these cases as a crusade for employee rights. They defended the settlement, saying it was the best one possible given the uncertainties of continuing to trial. Anyone is the legal profession knows that lawsuits are always risky because the outcome is always uncertain. Lawsuits are also very costly. While Uber’s attorneys were undoubtedly paid very handsomely, the attorneys for the Uber drivers (approximately 385,000 of them) have had to pay the costs of litigating these cases to date all with the risk to them of not receiving a fee for its time and efforts. The attorneys for the Uber drivers are asking the judge for a 25 percent cut of the settlement, or about $21.75 million, to cover her team’s costs.

In my opinion, it seems that the lawyers for the Uber drivers are folding their cards in return for a fat fee and promises from Uber that it will make some minor changes to its driver policy. I am sure fighting Uber is a hard and arduous undertaking, but once you take case, a lawyer is supposed to do what is in the client's best interest and not their own....and certainly not where the opponent (Uber) makes out better than all of the parties. It is as if this settlement was a clear victory for Uber.

In the end, a settlement removes the biggest threat to Uber's Business model, while Uber drivers get a bit more protection by having less stringent rules before Uber can deactivate a driver and drivers are allowed to ask for tips from passengers. BIG DEAL......This is a settlement that is fair to drivers? NO WAY. NOT IN MY BOOK. The small amount of money that will be paid to drivers in California and Massachusetts is peanuts and not worth it. This lawsuit was supposed to be about vindicating the rights of Uber drivers, but a settlement of this nature does not accomplish that goal. All this settlement does is provide a big payday for the lawyers representing the Uber drivers. Yes, they worked extremely hard over the past 2.5 years, but in the end they will get about $21.75 million in legal fees from this case. This is a huge incentive for them to settle and the impetus to convenience their clients (the drivers) that the settlement will give them more rights and will vindicate their interests.

I have the utmost respect for the plaintiffs’ attorneys as they took a case and financed it all the way, but I believe they had a great case and would have won. I have been litigating cases involving the issue of employer-employee relationship in almost every forum in New York for the past 20 years and this is one of the most clear cut cases of employer employee relationship I have ever seen. So why settle, especially before the plaintiffs’ attorney even had the chance to make a motion for summary judgment asking the court to declare Uber's drivers to be employees as a matter of law? The answer is that the plaintiffs’ attorneys worked hard, paid money from their own pockets to litigate the case and they wanted to get paid.....and now they will....BUT the real issue of whether Uber's drivers are employees or independent contractors will remain unsettled.

What a shame for the drivers, because they really don't get anything here.....and what a shame for the legal profession because now it is just another case where the lawyers settle because money has that kind of effect on people. This degrades the legal profession....and kind of makes me ashamed to be a part of it. A lawyer is supposed to zealously represent the interests of their client (not their own interests). I apologize in advance to the attorneys for the drivers, but this case has turned into just another case for them to make money. It turns out that it was not about vindicating the rights of drivers. Each driver really did not have much to lose by continuing to litigate the case, but the plaintiffs’ attorneys had millions of dollars in legal fees to lose. This appears to be simply too much for them to risk. The drivers didn't have much to risk by continuing. This is a pathetic settlement that the drivers should reject as it is their case and they should demand more.

Sometimes you have to take a risk and sometimes that risk means taking a case all the way and get a decision. Yes, it would have been a big gamble for the plaintiffs’ attorneys and they did a great job thus far, but I felt so strongly about this case that if asked, I would have worked with them for free. After 20 years of practicing law, I still believe in justice...and in this case, justice was not served. Uber continues to operate with impunity, their business model survives and the drivers go on as usual, getting treated like cattle, when in fact they are as close to an employee of Uber as any case could possibly expose. Again, Uber wins, the lawyers win and the drivers, who are the represented parties, get nothing in the long run.

In the meantime, U.S. District Judge Edward Chen may refuse to approve the settlement until it provides real benefits and lower legal fees. Everything Judge Chen has said up until this point seems to suggest that he was looking forward to a jury trial in this case. The plaintiffs in Uber's case were seeking $3.4 billion, a fairly ridiculous sum but one they thought they were owed. Judge Chen could decide that $100 million isn't enough compensation, or that the reforms Uber is promising more transparency, an ability for drivers to solicit tips and challenge deactivations through arbitration, recognition from Uber of quasi-union "driver associations" don't even scratch the surface.

Until a court decides whether Uber drivers are employees or independent contractors, the debate will not end. I guess a new set of plaintiffs in other states will have to hope for a lawyer that is willing to take the risk of taking this type of case to trial and consider more than their own self interests in being compensated for their efforts rather than the cause they were supposed to be seeking, which is justice. In this case, once again, Uber is the clear winner.

Will Uber Become Orwell’s Big Brother?

I have spent the vast majority of my career being directly involved in the legal and operational aspects of the for-hire vehicle industry in New York City. The below is a summary of my current thoughts and predictions of what will happen in the future. Most people think that driverless vehicles are something that will be created, but an invention that we will not see during our lifetimes. Others believe that it will be an impossible feat. I believe in technology and have seen how technology has not only transformed certain major industries, but has revolutionized the world. But, while technology is a great thing, it can also cause drastic unintended consequences that may or may not be disastrous to our society.

I can go on and on about different examples of how technology has transformed the world, but my favorites are: who would've thought 30 years ago that people would pay to watch television? Who would've thought 15 years ago that people would be standing in long lines to pay $5.00 dollars for a cup of coffee? Who would've thought 10 years ago that kids would be taking small cell phones with them to school? Who would've thought 8 years ago that a device called the iPhone would in actuality not only be a minicomputer, but would become the primary means by which people communicate with each other? When Steve Jobs cofounded Apple in 1976, I doubt he would have believed that one day his company would become the most valuable company on earth.  

So based upon historical facts, is it so far-fetched to believe that the transition to driverless vehicles will come over the next few decades? While there are huge hurdles before there can be widespread adoption, I believe the sweeping change they bring will eclipse every other innovation our society has ever experienced.

They will cause unprecedented job loss and a fundamental restructuring of our economy, solve large portions of our environmental problems, prevent tens of thousands of deaths per year, save millions of hours with increased productivity, and create entire new industries that we cannot even imagine from our current vantage point. The transition is already beginning to happen. Tesla Motor believes that their 2015 models will be able to self-drive 90 percent of the time. We already know that certain models of higher-end vehicles already feature technology that takes control of steering, acceleration and braking at highway speeds of 70 miles per hour or in stop-and-go congested traffic. So is it so far-fetched to believe that driverless vehicles will be available to the public by 2020?

Next to a house, an automobile is the second most expensive asset that most people will ever buy. Accordingly, it is no surprise that companies like Uber and Zipcar are quickly gaining popularity as an alternative to car ownership. It is now more economical to use a car service if you live in a city than to own a vehicle. The impact on private car ownership will be enormous: The car purchasers of the future will not be the consumer – cars will be purchased and operated by the so-called “ride sharing” and car sharing companies.

It should be no surprise that, in my opinion, unless there is a drastic shift in the earth, Uber will eventually replace all of its drivers with self-driving cars. Consider this- why does Uber have a valuation of over $40 billion dollars? Currently, Uber drivers take home at least 75% of every fare. What will happen when Uber eventually replaces all of its drivers with self-driving cars?

The once coveted New York City taxi medallion, which used to fetch upwards of over $1,000,000.00, has drastically dropped in value since the onslaught of Uber. Additionally, Uber not only has more vehicles on the road than taxis in New York City, but more people are using this service because let's face it: who wants to take a ride in the taxi when, for approximately the same amount of money, you can take a ride in a “black car” or car service vehicle. There are approximately 171,000 taxis in the United States. If Uber were to purchase a driverless vehicle at the cost of $25,000 per car, the rollout would cost a mere $4.3 billion. This would be a drop in the bucket for a company that taken the transportation industry around the world by storm over the course three years. It took many car services in New York City decades to build brand names, reliable services and loyal customers. Uber came out of nowhere, took the transportation world by storm and has been rolling over everyone and everything that has attempted to get in its way.

The effects of the autonomous car movement will likely be staggering. Some people predict that the number of vehicles on the road will be reduced by 99%, estimating that the fleet of vehicles on the road will fall from 245 million to just 2.4 million. Since disruptive innovation does not take kindly to entrenched competitors – like Blockbuster, Barnes and Noble, Polaroid, and dozens more like them, it is unlikely that major automakers like General Motors, Ford, and Toyota will survive the leap. They are geared to produce millions of cars in dozens of different varieties to cater to individual taste and have far too much overhead to sustain such a dramatic decrease in sales. My prediction is that most automakers will be bankrupt by 2030, while startup automakers like Tesla will thrive on a smaller number of fleet sales to operators like Uber by offering standardized models with fewer options.

Ancillary industries such as the $198 billion automobile insurance market, $98 billion automotive finance market, $100 billion parking industry, and the $300 billion automotive aftermarket will collapse as demand for their services evaporates. We will see the obsolescence of rental car companies, public transportation systems, and, good riddance to the ever hated parking and speeding tickets. But we will see the transformation of far more than just consumer transportation: self-driving semis, buses, earth movers, and delivery trucks will obviate the need for professional drivers and the support industries that surround them.

The Bureau of Labor Statistics lists that 884,000 people are employed in motor vehicles and parts manufacturing, and an additional 3.02 million in the dealer and maintenance network. Truck, bus, delivery, and taxi drivers account for nearly 6 million professional driving jobs. Virtually all of these 10 million jobs will be eliminated within 10-15 years, and this list is by no means exhaustive. Others believe that despite the job loss and wholesale destruction of industries, eliminating the needs for car ownership will yield over $1 trillion in additional disposable income – and that is going to usher in an era of unprecedented efficiency, innovation, and job creation.

Is it really possible that a 90% reduction in vehicle crashes would save nearly 30,000 lives and prevent 2.12 million injuries annually. Driverless cars do not need to park – vehicles cruising the street looking for parking spots account for an astounding 30% of city traffic, not to mention that eliminating curbside parking adds two extra lanes of capacity to many city streets. Traffic will become nonexistent, saving each US commuter 38 hours every year – nearly a full work week. As parking lots and garages, car dealerships, and bus stations become obsolete, tens of millions of square feet of available prime real estate will spur explosive metropolitan development. The environmental impact of autonomous cars has the potential to reverse the trend of global warming and drastically reduce our dependence on fossil fuels. Passenger cars, SUVs, pickup trucks, and minivans account for 17.6% of greenhouse gas emissions– a 90% reduction of vehicles in operation would reduce our overall emissions by 15.9%. As most autonomous cars are likely to be electric, we would virtually eliminate the 134 billion of gasoline used each year in the US alone. And while recycling 242 million vehicles will certainly require substantial resources, the surplus of raw materials will decrease the need for mining.

Uber is certainly plotting its future without drivers as they have reached a strategic partnership with Carnegie Mellon University to create an “Advanced Technology Center.” The center is slated to perform research and development in the areas of mapping, vehicle safety, and autonomy technology.

So let's take a look at New York City alone. Inside of 3 years Uber has more vehicles on the road that available taxi medallions. Uber has created a name that is synonymous with car service and transportation.  The value of taxi medallions has dropped drastically. The entities the loan money to the holders of the taxi medallions are shaking in their boots. Car services that took decades to build legitimate community-based businesses are being displaced. Most of all, New York City elected officials and government regulators have been unable or unwilling to look into the future and consider what the ultimate effect Uber will have on the transportation industry, the economy of the city and the consequences upon the world of allowing Uber to continue their quest unabated.

At one point in the history of our nation, our President referred to the Soviet Union as the "evil empire". In recent history, Google has been referred to as an evil empire. Not an empire of territory, as was Rome or the Soviet Union, but an empire controlling our access to data and our data itself. Antitrust lawsuits proliferating around the company demonstrate Google’s quest for monopoly control over information in the information age. Its search engine has become indispensable for most of us, and we now allow Google to determine what is important, relevant, and true on the Web and in the world. We trust and believe that Google acts in our best interest. But we have surrendered control over the values, methods, and processes that make sense of our information ecosystem. And that's just the search engine.

So now back to Uber. We know that Uber collects data on its drivers and its customers, we know that Uber keeps track of the data of each in every trip its drivers perform and most of all, Uber seems to be developing a master plan for logistics. Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet requirements of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, animals, equipment and liquids, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated computer software.

In a nutshell, it appears that Uber is collecting data for a still yet to be determined purpose. People using their service are providing Uber with this information, which at one point a near future, may or may not be in the best interest of the consumer or the public in general. So just as Google’s search engine has become indispensable for most of us, will the information and data obtained by Uber, via the current services it provides, be used to determine how the world will operate, what industries will be decimated, what means will be available for people to travel, communicate, work and think?

Overall, by the time the world wakes up to Uber’s “grand plans”, will we have surrendered control over the values, methods, and processes that make sense of our world, just how we have surrendered the entire information ecosystem to Google. Currently we trust and believe that Google acts in our best interest. But in light of what Google has accomplished, are we as a society going to be so willing to trust and believe that Uber will act in our best interest in the future?

In my opinion, elected officials, governmental regulators, leaders of all major industries and society in general should take a broader look at what Uber is currently doing, what is likely to do in the future and whether the impact of its effect on the world is something that we are willing to blindly accept today, all while taking the risk that Uber will not cause just a major disruptions to the world as we know it, but take the risk that it will not become a true “evil empire”, by using all of its knowledge, data, software and logistics sophistication, and of course the huge amount of money that will make over the coming years, to create a world that we either do not want to or are not prepared to live in.

Whether Uber will ultimately control the world is yet to be seen. But remember where this article started: there was a point in history were no one could've imagined travelling in an automobile instead of riding a horse, traveling across country in an airplane rather than a steam locomotive or using email to communicate with another rather than using the pony express. The tyranny that is epitomized in the book “1984”, involved George Orwell’s view that one day Big Brother would enjoy power entirely for its own sake, not interested in the good of others, but interested solely in power. Will Uber become the Orwellian “Big Brother”?