A Tale of Two $100-Million Dollar Independent Contractor Misclassification Settlements

Photo by Dan Gold on Unsplash
Photo by Dan Gold on Unsplash

From JDSupra, Richard Reibstein compares the recent settlements of misclassification lawsuits reached by Uber and Swift. Richard writes:

As reported in our blog post on April 22, 2016, Uber Technologies had reached a $100-million dollar proposed settlement with about 385,000 drivers in California and Massachusetts; $84 million was guaranteed and another $16 million would be added if Uber went public and achieved a certain valuation within its first year after an initial public offering. But that settlement proposal was rejected by a federal district court judge on August 18, 2016, as we reported in our post that day, because the amount allocated to the drivers’ Private Attorneys General Act (PAGA) claim was regarded by the judge as inadequate.

Yesterday, Uber and a much smaller class of 13,600 drivers who had opted out of the arbitration provisions in the Uber driver agreement reached a proposed settlement for $20 million along with certain non-economic benefits to drivers. O’Connor v. Uber Technologies, Inc., No. 15-cv-262 (N.D. Cal. Mar. 11, 2019).  Taking its place, though, is a $100-million dollar settlement in an IC misclassification case between Swift Transportation Co. and approximately 20,000 owner-operator drivers who entered into an independent contractor agreement with Swift. Van Dusen v. Swift Transportation Co., Inc., No. CV 10-899 (D. Ariz. Mar. 11, 2019).

The Swift lawsuit was commenced in the federal district court for Arizona over nine years ago.  The class action complaint claimed that the drivers were employees of Swift who had been misclassified as ICs and were paid below the federal minimum wage level when taking into account their lease payments and costs of maintaining their trucks and paying for fuel, tolls, and insurance. The lawsuit against Swift was brought under the Fair Labor Standards Act as well as state wage and contract laws.

Uber was able to trim the number of class members from 385,000 to 13,600 drivers by implementing an arbitration clause that less than 4% of the drivers opted out of when afforded the opportunity to do so.  Although its arbitration clause was later challenged in court, Uber was able to succeed in compelling arbitration for all drivers other than the relatively small percentage who had opted out.

In stark contrast, Swift was unsuccessful in seeking to compel arbitration on an individualized basis under the arbitration provisions in the drivers’ IC agreements.  Swift’s arbitration clause was found unenforceable when it was held by a district court judge to be part of a “contract of employment” that is exempt from arbitration under the Federal Arbitration Act (FAA) and the Arizona Arbitration Act.  This court ruling eventually led Swift to agree to the proposed settlement.

Read the full story at A Tale of Two $100-Million Dollar Independent Contractor Misclassification Settlements | Locke Lord LLP – JDSupra

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