A California federal judge on Friday preliminarily approved Postmates Inc.’s $8.75 million settlement that would resolve a proposed class action claiming the on-demand delivery service misclassified its couriers as independent contractors and paid them below minimum wage.
U.S. District Judge Jeffrey S. White said in his order that claims brought on behalf of workers in the so-called gig economy are still relatively novel. No California court has definitively established whether the gig workers are, in fact, employees or independent contractors, the judge said. Therefore, it’s not clear that the Postmates couriers would prevail and recover damages at trial, particularly since Postmates’ arbitration agreement covers 70 percent of the couriers, Judge White said.
“A class recovery through settlement may be the best hope for most of these couriers recovering anything at all on these claims, given the very low number of couriers who would file individual claims, if required to do so,” the judge said.
If granted final approval, the deal would resolve a putative class action filed in March 2015 that alleged Postmates misclassified its couriers as independent contractors in California, Massachusetts, New York and Washington, D.C. The suit alleges that by doing so, Postmates violated California’s labor statutes, the Private Attorneys General Act and the federal Fair Labor Standards Act and seeks to represent a nationwide class under the FLSA.
Under the deal, $100,000 will be allocated to resolve the PAGA claims, 75 percent of which will be paid to the state and 25 percent of which will be paid to couriers. Approximately $300,000 will be set aside for the settlement administrator, Garden City Group, and the class attorneys will request 25 percent of the gross payment, or $2.187 million, to be allocated to attorneys’ fees and costs.
In addition to monetary relief, Postmates has agreed to change its business practices by adopting a provision that says they can only terminate couriers’ contracts for specified reasons and offering couriers occupational accident insurance.
The company also agreed to implement a method for couriers to challenge most termination decisions in arbitration at Postmates’ expense and a means for couriers to give feedback to Postmates regarding their use of the platform and interactions with the company, according to court documents.
In court documents, attorneys for the couriers argued that the nonreversionary settlement is an excellent result for the couriers and represents approximately 15 percent of their estimated nationwide potential recovery if the claims were to be successful at trial. Each proposed class includes thousands of couriers, totaling approximately 88,000 couriers in California, 28,000 couriers in New York, 3,000 couriers in Massachusetts, 8,000 couriers in Washington, D.C., and 107,000 couriers throughout the rest of the country, according to the couriers’ attorneys.
Read the full story at Postmates’ $9M Misclassification Deal Gets OK’d – Law360