Uber Accidents and Driver Misclassification: Lawsuits and Settlements Totaling Hundreds of Millions

Uber Accidents, Driver Misclassification, and the Multi-Million Dollar Settlements That Followed

Several states have audited or investigated Uber and Lyft over the classification of their drivers as independent contractors rather than employees. This issue is central to ongoing legal battles, as driver classification directly impacts workers’ rights, including access to benefits like minimum wage, unemployment insurance, and workers’ compensation. For drivers involved in Uber accidents, classification also affects their ability to seek compensation for injuries sustained while working. Below are some states that have conducted audits or taken legal action regarding this issue.

How Uber Accidents and Driver Misclassification Have Led to Legal Battles Across the U.S.

1. California

California has been one of the most proactive states in investigating and challenging the classification of Uber and Lyft drivers as independent contractors. The state passed Assembly Bill 5 (AB 5) in 2019, which aimed to reclassify many independent contractors, including rideshare drivers, as employees. The bill was based on the Dynamex decision from the California Supreme Court, which established a stricter test for determining whether workers should be classified as independent contractors or employees.

However, Uber and Lyft opposed AB 5, arguing that their drivers should remain independent contractors. In response, the companies spent over $200 million on a successful campaign to pass Proposition 22 in 2020, which exempted them from the provisions of AB 5 and allowed them to continue classifying their drivers as independent contractors. Despite this victory, legal challenges against Prop 22 continue, and California’s attorney general has been involved in multiple legal actions regarding this classification issue, including those involving Uber accidents.

Summary of Payments Related to Driver Misclassification:

Proposition 22 Campaign: Uber and Lyft spent over $200 million on the campaign to pass Proposition 22.
California AG Settlement (2020): Uber and Lyft paid $20 million to settle some aspects of driver misclassification with California’s Attorney General.
Uber Class Action Settlement (2016): Uber paid $100 million to resolve a class action lawsuit over driver misclassification.
Lyft Class Action Settlement (2016): Lyft paid $12.25 million to settle a similar class action lawsuit.

2. Massachusetts

Massachusetts has also been a significant state in the debate over driver classification. The Massachusetts Attorney General’s Office launched investigations into Uber and Lyft’s classification of drivers, questioning whether they should be treated as employees with access to benefits like unemployment insurance. In 2019, a judge ruled that Uber and Lyft drivers were employees under state law, but the decision was overturned on appeal.

Despite this setback, Massachusetts lawmakers have continued to push for legislation that would require Uber and Lyft to treat their drivers as employees, reflecting the ongoing legal and political pressure on rideshare companies in the state.

In 2016, Uber reached a $27 million settlement with drivers in Massachusetts (and California) as part of a class action lawsuit concerning driver misclassification. The settlement aimed to resolve claims that Uber had improperly classified its drivers as independent contractors rather than employees, which meant drivers were not entitled to employee benefits such as unemployment insurance, workers’ compensation, and other protections.

While Uber did not admit to any wrongdoing, the settlement provided financial compensation to drivers. Additionally, the settlement led to changes in Uber’s policies, including:

Uber agreed to provide more transparency about driver earnings.
It also agreed to implement a tipping feature in the app to allow drivers to accept tips directly.

However, the settlement did not fundamentally change the classification of drivers as independent contractors, which was the core issue in the case.

Similarly, Lyft reached a $12.25 million settlement in 2016 with drivers in Massachusetts and California over a class action lawsuit regarding driver misclassification. The lawsuit argued that Lyft drivers should be classified as employees and entitled to benefits such as minimum wage, unemployment insurance, and workers’ compensation.

Like Uber, Lyft did not admit to any wrongdoing in the settlement but agreed to provide financial compensation to the drivers involved. The settlement also included changes to Lyft’s operational policies, such as:

Providing more clarity regarding the drivers’ pay structure.
Implementing a tipping feature in the app, which had been a point of contention for drivers.

Again, this settlement did not change the fundamental classification of Lyft drivers as independent contractors.

On June 27, 2024 Attorney General Andrea Campbell’s office abruptly ended an ongoing trial and settled a lawsuit that had charged Uber and Lyft with violating the Commonwealth’s wage and hour laws by improperly classifying their drivers as independent contractors rather than as employees.

The deal provides rideshare drivers with a guaranteed minimum wage and other protections and sets $175 million in penalties for the two companies. “Today’s agreement holds Uber and Lyft accountable,” Campbell said in announcing the settlement.

3. New York

In New York, the Department of Labor (DOL) has reviewed Uber and Lyft’s classification of drivers, particularly regarding the right to unemployment insurance and workers’ compensation. In 2015, the New York Supreme Court ruled that Uber drivers should be considered employees for the purposes of workers’ compensation, but this decision was later challenged by Uber. The state has also scrutinized whether rideshare drivers should be classified as employees when it comes to tax benefits, including unemployment insurance.

In 2017, Uber reached a $20 million settlement with drivers in New York (and nationwide) as part of a class action lawsuit over driver misclassification. The lawsuit argued that Uber had misclassified its drivers as independent contractors rather than employees, which deprived them of employment benefits such as minimum wage, workers’ compensation, and other protections under state labor laws.

The $20 million settlement provided financial compensation to drivers, but it did not change the classification of Uber drivers as independent contractors. Additionally, Uber made changes to its operations in response to the lawsuit, including:

Improving transparency regarding driver earnings.
Introducing a tipping feature for drivers, allowing them to receive tips directly through the app.

However, as with other settlements, Uber did not admit to liability and maintained that its drivers were independent contractors.

Similarly, Lyft reached a $12.25 million settlement in 2017 to resolve a class action lawsuit related to driver misclassification in New York (and California). The lawsuit argued that Lyft had misclassified its drivers as independent contractors, thus denying them employee benefits like health insurance, paid leave, and workers’ compensation.

The $12.25 million settlement compensated the affected drivers, but like Uber’s settlement, it did not change the fundamental classification of Lyft drivers as independent contractors. Lyft also agreed to improve transparency about pay and to provide better communication about policies affecting drivers.

In 2020, the New York City Council passed legislation requiring Uber and Lyft to contribute to a driver fund to provide benefits like paid sick leave. The city’s approach reflects its efforts to ensure that gig workers, including rideshare drivers, have access to protections that come with employee status.

In November 2023, Attorney General James secured $328 million in back payments for drivers after an OAG investigation found that Uber and Lyft withheld funds from drivers and failed to provide valuable benefits. New York secured $290 million from Uber and $38 million from Lyft, which also instituted a minimum driver “earnings floor,” paid sick leave, proper hiring and earnings notices, and other improvements in drivers’ working conditions.

4. New Jersey

New Jersey has also taken a strong stance against Uber and Lyft’s classification of drivers as independent contractors. The New Jersey Department of Labor and Workforce Development has conducted audits into Uber’s practices, particularly in relation to unemployment insurance claims filed by drivers. New Jersey’s approach to driver misclassification is largely guided by its application of the ABC test, which is similar to California’s standard, making it more challenging for companies like Uber and Lyft to classify drivers as independent contractors.

New Jersey lawmakers have also proposed bills that would ensure gig workers are classified as employees, as they continue to explore solutions that address the evolving nature of the gig economy, especially when it comes to Uber accidents.

In 2020, New Jersey’s Attorney General and Department of Labor and Workforce Development launched investigations into the classification of Uber and Lyft drivers. The state alleged that Uber and Lyft were improperly classifying drivers as independent contractors, potentially violating labor laws related to unemployment benefits, workers’ compensation, and other protections typically afforded to employees.

While New Jersey has not yet reached major settlements like other states, the investigations were a response to concerns that drivers were not being granted employee benefits, such as minimum wage, sick leave, and workers’ compensation.

One of the more notable developments came in 2020 when Uber was required to pay $100 million in a settlement with the New Jersey Department of Labor. This settlement stemmed from a legal battle over whether Uber drivers were entitled to unemployment benefits during the COVID-19 pandemic. The issue revolved around whether Uber drivers should be classified as independent contractors or employees for the purpose of receiving state unemployment insurance.

Uber’s $100 Million Settlement: In this settlement, Uber agreed to pay $100 million to resolve claims that its drivers were improperly denied unemployment benefits during the pandemic. The settlement was seen as a way to resolve issues related to driver misclassification for the purposes of unemployment insurance, although it did not change the classification of drivers as independent contractors.

Uber did not admit any wrongdoing in the case but agreed to the settlement to avoid further litigation and legal costs. This settlement was specifically related to unemployment insurance and the COVID-19 pandemic, not a broader classification change.

5. Illinois

Illinois has been another state where Uber and Lyft’s classification of drivers has come under scrutiny. In 2019, the Illinois Department of Employment Security (IDES) conducted an audit into the classification of Uber drivers to determine whether they were entitled to unemployment benefits. The investigation stemmed from a lawsuit filed by an Uber driver who claimed they were entitled to benefits as an employee. The Illinois Supreme Court has been involved in cases relating to worker classification in the gig economy, although the state has not passed comprehensive laws requiring Uber and Lyft to treat drivers as employees.

In 2020, Uber reached a $38 million settlement to resolve a class action lawsuit filed by drivers in Illinois (along with drivers in other states) concerning driver misclassification. The lawsuit alleged that Uber drivers should be classified as employees rather than independent contractors, and the drivers were therefore entitled to employment benefits, such as minimum wage, unemployment insurance, and workers’ compensation.

The settlement addressed claims that Uber had denied its drivers benefits available to employees, like proper reimbursement for work-related expenses and other employment-related protections. As part of the settlement:

$38 million was paid to drivers to compensate for the alleged misclassification and the denial of benefits.
Uber also agreed to modify certain practices, such as increasing transparency regarding driver pay and introducing a tipping feature, which had previously been absent in the app.

However, Uber did not admit to any wrongdoing in the settlement, and the payment was part of a broader attempt to resolve legal disputes around driver classification without changing the independent contractor status of its drivers.

6. Washington

Washington state has also investigated the classification of Uber and Lyft drivers, particularly in terms of benefits and labor rights. In 2020, the Washington State Supreme Court ruled that Uber drivers were eligible for workers’ compensation coverage, which is typically provided to employees, not independent contractors, an issue that has become more significant in light of Uber accidents. The decision was significant because it underscored the need for states to adapt their labor laws to account for the rise of gig economy platforms like Uber and Lyft.

The state has also explored potential legislation to address the classification of gig workers, including a proposal for a new employment classification for gig workers that would provide certain benefits while still maintaining some aspects of independent contractor status.

7. Oregon

Oregon has similarly scrutinized Uber and Lyft’s practices concerning worker classification. In 2021, Oregon’s Bureau of Labor and Industries investigated Uber’s treatment of drivers, particularly around issues such as overtime pay, benefits, and access to unemployment insurance. Oregon, like many other states, has considered the adoption of laws that would require gig economy companies to offer more protections to drivers, including paid sick leave and access to benefits typically afforded to employees, particularly in cases involving Uber accidents.

8. Nevada

Nevada has also conducted investigations into Uber’s classification of drivers, particularly in relation to labor protections and workers’ compensation. In 2020, Nevada’s labor department looked into the classification of Uber drivers when a driver filed a claim for workers’ compensation. Similar to other states, Nevada uses tests to determine whether workers should be considered independent contractors or employees, which could have major implications for Uber and Lyft drivers in the state, in the event of Uber accidents.

Key Takeaways on Uber Accidents, Driver Misclassification, and Legal Settlements

The debate over Uber driver classification has led to major lawsuits and multimillion-dollar settlements across several states. From challenges in accessing benefits to the impact of Uber accidents on compensation claims, these legal battles continue to shape the rideshare industry.

Know Your Rights After Uber Accidents – Get the Legal Help You Need From Drazin and Warshaw in New Jersey

Uber accidents are devastating. If you found yourself the victim of Uber accidents in New Jersey and are unsure about your rights as a driver or passenger, legal guidance can make all the difference. With ongoing legal battles over driver classification, understanding your options for compensation is crucial. Contact Drazin and Warshaw today to discuss your case and protect your rights. We represent clients in Red Bank, Hackensack, New Brunswick, Piscataway, Metuchen, and the surrounding areas.

Disclaimer: This blog is intended for informational purposes only and does not establish an attorney-client relationship. It should not be considered as legal advice. For personalized legal assistance, please consult our team directly.