Uber Technologies Inc. will pay $20 million to settle California lawsuits challenging the company’s classification of drivers as independent contractors, rather than employees owed the benefits of traditional employment.
Resolution of the long-standing fight over benefits and pay comes as Uber is preparing for its initial public offering later this year. The litigation attacked the ride-sharing company’s business model of treating its drivers as contractors to avoid the costs of paying a minimum wage, overtime, sick leave and health insurance.
The central lawsuit initially posed a threat to Uber as it grew to represent as many as 385,000 drivers in California and Massachusetts after a San Francisco judge granted class-action status. That momentum was undone by an appeals court ruling upholding Uber’s arbitration agreements as largely valid and enforceable, which ultimately reduced the class to about 13,600 drivers, who will partake in the settlement.
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