Federal Judge Throws Out Uber Driver Class-Action Settlement Offer

Uber, the San Francisco-based ride-hailing service has been dealt a legal setback in its effort to settle a multi-million dollar claim by drivers who say they should be reclassified as employees, not independent contractors. On Thursday, a federal judge rejected Uber's $100 million settlement offer.

Eric Risberg/AP

A federal judge in San Francisco has upended Uber's bid to settle a class-action lawsuit with drivers who claim they are employees and not independent contractors.

U.S. District Judge Edward Chen ruled Thursday that Uber's $100 million offer is "not fair, adequate, and reasonable."

In April, Uber, based in San Francisco, had offered to pay $84 million to about 385,000 drivers in California and Massachusetts. It sweetened that offer by promising to pay an additional $16 million to the drivers if the company reached a valuation 1.5 times its current value of about 62.5 billion after the company goes public. Under the proposed settlement, drivers would remain contractors and not be classified as employees.

(The company's valuation is up for debate as one prominent analyst puts it at $28 billion, but that's another story.)

But Chen said Uber's offer represented only about 10 percent of what the drivers' attorneys claim they would be owed in potential damages. The judge's order included a chart showing those claims coming in at about $700 million in mileage reimbursement alone, and another $150 million in tips, overtime and phone reimbursements.

In a statement, Uber spokesman Matt Kallman said, "The settlement, mutually agreed by both sides, was fair and reasonable. We're disappointed in this decision and are taking a look at our options."

Uber and the drivers could try to reach another settlement or take their case to trial.