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Uber settlement keeps drivers as contractors in 2 states

Under the deal, Uber will pay $84 million to the plaintiffs in California and Massachusetts and an additional $16 million if the company goes public and meets certain goals. | Eric Risberg/AP

SAN FRANCISCO — Uber has agreed to pay up to $100 million to settle a pair of major class-action lawsuits in two states that will keep its drivers independent contractors instead of employees, both sides announced Thursday night.

The settlement is a major step toward the ride-hailing company keeping its current thriving business model, which has been threatened as drivers have sought a more secure status and more bargaining rights.

Under the deal, Uber will pay $84 million to the plaintiffs in California and Massachusetts and an additional $16 million if the company goes public and meets certain goals.

In a concession touted by the plaintiffs, Uber will allow drivers to put signs in their cars saying “tips are not included” in the price of a ride and would be appreciated. Lyft, a rival ride-hailing service, allows for riders to add a tip for the driver on the app. Uber does not.

San Francisco-based Uber also agreed to improve its systems for communicating with drivers about their ratings and why they are terminated, to allow arbitration in disputes with drivers, and to help start drivers’ associations in both states.

In the past, Uber could de-activate drivers at will. Now the company must give cause for de-activation, and certain standards like drivers’ accepting too few passengers are no longer consider grounds for being cut off by the company.

“We believe these to be very significant changes that will improve work conditions for Uber drivers,” plaintiffs’ attorney Shannon Liss-Riordan said in a statement on the deal.

Classifying its workers as employees could have raised Uber’s operating expenses significantly and would go against its business model and identity. Uber’s selling points for drivers are based on ideas of freedom and autonomy.

“Drivers value their independence — the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours,” Uber CEO Travis Kalanick said in a company blog post announcing the settlement.

Federal law does not extend collective bargaining rights to independent contractors such as architects, masseuses or workers dispatched through mobile applications like Uber and Lyft.

The settlement, which involved 385,000 drivers in in the two cases, was filed in a U.S. District Court in San Francisco. A federal judge still must sign off on the deal.