The Art of Settling But Not Resolving Gig Worker Status Disputes

Gig economy companies like Uber Technologies Inc., Lyft Inc., and Grubhub Inc., have paid hundreds of millions to defend and settle claims over the past decade that they wrongly classified workers as independent contractors, but legal and practical hurdles for plaintiffs and state enforcers mean these companies have not had to reclassify their workforces.

New Jersey’s extraction of $100 million from Uber follows this trend.

While it resolves allegations that the company misclassified its drivers and failed to pay unemployment insurance taxes, Uber and a subsidiary will not be required to change the way they classify drivers going forward.

Such multimillion dollar payouts appear to be a good deal for Uber and other gig economy companies, which have contended that being forced to make drivers employees would necessitate business model changes that would cost them far more than litigation does.

One major hurdle for plaintiffs is that companies force gig worker claims into arbitration, and federal courts often uphold mandatory arbitration clauses in employment contracts, said Shannon Liss-Riordan, an attorney based in Massachusetts who has sued Amazon.com Inc., Uber, Lyft, and others on behalf of gig workers.