Uber has agreed to settle a class-action suit filed by its drivers in California and Massachusetts for $100 million. This effectively frees the ride-hailing company from the trouble of going through a complicated jury trial.

According to the terms of the agreement, the proposed settlement money would go to compensation and fees for the drivers. An initial amount of $84 million would be distributed among the affected drivers who have used the Uber app from 2009 until the date a court approves the settlement. The money will be apportioned according to the number of miles they have driven with an Uber passenger.

The agreement includes a provision that Uber will also be obligated to pay an additional $16 million if the company goes public or sells out at a price equivalent to 1.5 times higher than its valuation at the time of public offering or acquisition.

A significant feature of the agreement for the drivers is that Uber will be bound to improve their working conditions.

Under the agreement, Uber would no longer be able to deactivate drivers at will. Drivers need to be informed of the circumstances of their deactivation such as the reasons for denial of access to the Uber app, when they can resume using it and the opportunity to appeal decisions.

The agreement also calls for Uber to allow the drivers to form a drivers' association and conduct regular meetings to thresh out work-related issues. However, the association would not be able to unionize and engage in collective bargaining.

The most significant aspect of the agreement for Uber is that the company will be able to continue classifying its drivers as independent contractors.

Uber CEO Travis Kalanick made clear his satisfaction with the agreement when he said in a blog post:

"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. That's why we are so pleased that this settlement recognizes that drivers should remain as independent contractors, not employees."

The historic agreement, if approved by a federal judge, brings a 180-degree turn to how workers in on-demand businesses are treated even as they retain their contractor classification for the time being.

For now, the battle between Uber and its drivers in California and Massachusetts may have been settled, but the fate of the gig economy still hangs in the balance until and after a court decides whether an Uber driver is a contractor or an employee.

Photo: Heisenberg Media | Flickr

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