Today we announced a settlement in two important class-action lawsuits: O’Connor (California) and Yucesoy (Massachusetts). The key issue at stake in both cases is whether drivers using the Uber app should be classified as independent contractors or employees.
As part of this settlement, which covers all classification claims involving Uber in California and Massachusetts, the two sides have agreed that:
- Drivers will remain independent contractors, not employees;
- Uber will pay $84 million to the plaintiffs. There will be a second payment of $16 million if Uber goes public and our valuation increases one and a half times from our December 2015 financing valuation within the first year of an IPO;
- Uber will provide drivers with more information about their individual rating and how it compares with their peers. Uber will also introduce a policy explaining the circumstances under which we deactivate drivers in these states from using the app; and
- We will work together to create a driver’s association in both states. Uber will help fund these two associations and meet them quarterly to discuss the issues that matter most to drivers.
Six years ago when Uber first started in San Francisco, it was easy to communicate with the handful of drivers using the app. Austin Geidt, who ran marketing, called each one regularly to get their feedback and make sure things were working well. It was clear from those early conversations that drivers really valued the freedom Uber offered.
Today, while the number of drivers using our app has grown dramatically, their reasons for doing so haven’t changed. In the U.S. almost 90 percent say they choose Uber because they want to be their own boss. Drivers value their independence—the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours.
That’s why we are so pleased that this settlement recognizes that drivers should remain as independent contractors, not employees. As one driver told the court: “I’ve been an employee and an employer, and I’ve also been an independent contractor. I know the difference between these things. With Uber, I’m an independent contractor. And I wouldn’t have it any other way.” As another said: “I wouldn’t even want to be an Uber employee. I would quit if they tried to make me an employee, because I value my freedom as an independent contractor too much.”
That said, as Uber has grown—over 450,000 drivers use the app each month here in the U.S.—we haven’t always done a good job working with drivers. For example, we don’t have a policy explaining when and how we bar drivers from using the app, or a process to appeal these decisions. At our size that’s not good enough. It’s time to change.
So today we’ve published a driver deactivation policy for the first time. It will apply across the United States, and our goal is to roll out similar policies globally over time. You can read it in English, Spanish, Mandarin and Arabic, with more languages to follow.
It’s incredibly important that when people use Uber, they have a great experience—one that is safe, reliable, convenient and a good value. Otherwise, fewer passengers will use the app over time, which is bad for everyone. The policy explains why drivers are deactivated, the warnings we give and the circumstances in which drivers can use the app again.
Sometimes it’s clear that a driver shouldn’t be allowed on our platform: we permanently deactivate drivers who are violent, drink and drive, or refuse someone a ride because of the color of their skin or sexual orientation (it happens, sadly). But what if a driver’s rating declines due to poor driving or a smelly car? (And it’s not just bad smells that cause problems—we do get complaints about too much Febreze.) In those cases we let the driver know that there’s an issue and, if things don’t improve, we deactivate their account. We’re also working with a number of companies to provide affordable quality improvement courses.
As part of this settlement, Uber has agreed not to deactivate drivers who regularly decline trips when they are logged into the app. If too many drivers decline the rides we send their way, it undermines the reliability of the service for riders. But we understand that drivers need breaks, and sometimes things come up—maybe a kid has gotten sick at school. When drivers aren’t available, we’d just ask they turn off the app. And where drivers do have low acceptance rates—perhaps because they are multitasking at home—we will alert them to the issue. If things don’t pick up, we may log them out of the app for a limited period of time.
Uber has become an important part of many drivers’ lives, whether they drive all week or for a couple of hours to help pay the bills. So we’ve agreed to create an appeals process in California and Massachusetts for drivers who disagree with these decisions. In fact, we’ve been working on a pilot in Seattle for the last few months, which includes having other drivers hear these appeals. Our hope is that this kind of peer review process will improve transparency and accountability and give drivers an additional voice. If this approach is successful, we’ll look at rolling it out across the U.S.
Uber is a new way of working: it’s about people having the freedom to start and stop work when they want, at the push of a button. As we’ve grown we’ve gotten a lot right—but certainly not everything. This new deactivation policy is an important step forward when it comes to working with drivers. But there’s more to do, which is why I’m excited about some other improvements we have planned for the not too distant future. Stay tuned.
CEO and Co-Founder