Uber's $100 Million Settlement With Drivers Suddenly Looks Cheap

Disgruntled Uber and Lyft drivers in the United States have filed a series of lawsuits against the companies, arguing that they have been treated as contractors, when they should have been classified as employees. But, what’s the difference?

Well, if drivers were to be seen as employees, the companies would have to pay for expenses, like gasoline and vehicle maintenance, which are currently covered by the chauffeurs. And, that is exactly what the drivers are demanding: for Uber and Lyft to reimburse them the money they have spent over the past seven years.

Now, here comes the interesting part. According to court documents published Monday, drivers in in California and Massachusetts alone are entitled to roughly $730 million in reimbursements. This, added to a claim over tips, would result in damages of more than $850 million for Uber, the drivers’ attorneys said. However, the company has arrived to a very different figure: $429 million. The large difference mainly stems from very different mileage rates.

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As one might expect, Uber did not propose a settlement for that number. Instead, the company offered $100 million (about 12 percent of what the drivers asked for) to settle both class-action lawsuits, maintaining the drivers as contractors. For its part, Lyft has offered $12.25 million, or only 9 percent of what the conductors demanded.

Judge Edward Chen has yet to decide what will happen, but some early victories suggest the drivers could have the upper hand right now. However this plays out, the figures, which originally sounded high, suddenly seem like a bargain for the companies involved.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.