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Uber 20 Percent Gratuity Lawsuit Settled

— September 16, 2016

Uber Technology Inc. seems to stay in the legal spotlight. According to CNN Money, over 70 lawsuits have been filed against the company since it was founded in 2009. The claims range from classifying contract drivers wrong to discriminating against passengers with service animals. Many of those cases are still pending in court while others have been settled for millions of dollars. The Uber 20 percent gratuity lawsuit has been preliminarily approved.

Uber is an application driven taxi service. Passengers must sign up using their computer or smart phone, and then link their Uber account to their Paypal or credit card. From that point, the passenger can request a ride with the push of a button on their phone and will instantly know where his or her driver is located at that moment. All fees are paid through the app; no cash is exchanged with drivers.

In the gratuity lawsuit, a Uber passenger filed a class action lawsuit against the company alleging false advertising. The plaintiff asserted that on some rides, the Uber application charged a 20 percent gratuity fee, but that a large part of the gratuity goes to the company, not the driver. Because the driver did not receive the entire gratuity, the cost of her metered ride was higher than it should have been, or a fee that was not disclosed was being charged. Gratuities are generally monetary tips that are given to drivers, waiters and other people that provide a service.

Judge's gavel; image courtesy of
Judge’s gavel; image courtesy of

On September 15, the U.S. District judge, Northern District of California, preliminarily approved a settlement of the case. According to Bloomberg, Uber will be required to pay approximately $384,000 to 47,000 riders that used the application. It must also change its gratuity policy.

A lawsuit filed against Uber by its independent contract drivers is tied to the gratuity lawsuit. The drivers allege that they should not be classified as independent contractors. Instead, they should be treated as regular employees. The lawsuit is related to expenses and benefits, and the fact that Uber did not give them the gratuities that were intended for them. A settlement was presented in that case, but the judge rejected it. Uber was willing to pay $100 million to settle the case, would have an appeals panel for terminated employees, and would make it clear that tips were not included in fares, but the judge did not feel that the settlement was fair. In part, he was not convinced that a change in the gratuity policy would give driver’s a substantial increase in income as Uber had promised. Settlement negotiations are continuing in that case.

Even though Uber is paying out millions in lawsuit settlements, the company is making even more millions with their service. According to CNBC, the company is valued at $51 billion. Even so, one valuation expert has valued the company at more like $23.4 billion, while still others have valued it even less. Regardless, Uber is worth a lot of money, and it is generally cheaper to settle and get rid of the problem than it is to go to court. It will not be surprising to see a lot more of the pending cases settle in the near future.



CNN Money



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