Uber will pay $20 million to settle a lawsuit brought by its drivers, according to court documents filed late Monday night.
Drivers for the ride-hailing company argued in a six-year old lawsuit that they are employees, not independent contractors, as Uber has classified them, and therefore entitled to certain wage protections and reimbursement for their expenses.
The settlement amount is one-fifth of the settlement offer Uber proposed in 2016 to resolve the case, valued at up to $100 million, which U.S. District Judge Edward Chen at the time rejected as inadequate.
The new settlement was filed in federal court in San Francisco.
A California Supreme Court ruling last year made it much more difficult for companies like Uber to argue that their drivers are independent contractors, a decision that poses a threat to Uber’s business model.
In a statement, a company spokesman said “Uber has changed a lot since 2013,” and highlighted new programs and technology improvements to help drivers.
“We’re pleased to reach a settlement on this matter and we’ll continue working hard to improve the quality, security and dignity of independent work,” the spokesman said.
The settlement covers drivers in California and Massachusetts who drove for Uber from August 2009 through February of this year.
The ride-hailing company is expected to have an initial public offering this year and has been working to settle many of its legal disputes over the past few months.
Along with the monetary compensation, Uber also agreed to modify some of its business practices in California and Massachusetts. These changes include warning drivers before their accounts are deactivated and creating a formal appeal process for deactivated drivers who qualify.