Two different class-action lawsuits brought against Uber have been settled, and the result is that soon your Uber driver will be expecting a cash tip. The $100 million settlement was announced on Thursday and ends a dispute between 365,000 California and Massachusetts drivers who wanted to be classified as employees. Uber wanted the drivers to stay classified as independent contractors, a move that benefited them financially. The end result is that the luxury vibe the company was touting has been sacrificed to accommodate the settlement terms.
Starting Friday, Uber drivers can solicit tips from customers, something customers never worried about before because the implication has always been that the tip was built into the fare, which was the selling point. This move saddles the customers with an additional expense and annoyance because cash is now needed to accommodate the new tipping policy.
Prior to this announcement, the service was all inclusive and simple; the fare was charged to the credit card on file, and the passenger knew ahead of time what they were being charged. There was no need for a second payment method for gratuity, much less having to figure out how much more the service is worth. While that gave the customer a touch of class, this wasn’t sitting well with drivers who wanted the opportunity to make extra money like their counterparts at Lyft in addition to being classified as employees.
Lyft drivers already have the gratuity expectation, so that option has always been on their app. Uber’s statement on the FAQ page regarding payment options is no longer valid, but as of today, it remains on their site.
“You don’t need cash when you ride with Uber. Once you arrive at your destination, your fare is automatically charged to your credit card on file—there’s no need to tip.”
Uber has to change the language on their site immediately to clear up the misconception that the tip is included in the fare. Now, drivers can place signs in their cars informing riders that tips are additional and not included in the total. Uber founder and CEO Travis Kalanick may have won on the classification front, as drivers will continue to be classified as independent contractors, but his desire to keep the service all-inclusive has been lost. Kalanick was never excited about the prospect of tipping drivers. He wanted the experience to feel luxurious and personalized, which is why tips were calculated into the fare.
His resistance to allow gratuity was the motive behind the lawsuit. Uber advertises a non-cash business, and while drivers will be expecting a tip going forward, the company isn’t expected to change the app to include a tip option, according to Quartz.
Newsweek believes that while the approved terms benefit both parties, the new tipping policy may become a curse for both passengers and drivers alike. Attorney Shannon Liss-Riordan, who represented the drivers, believes that going forward, working conditions will greatly improve for drivers, especially those who believe they have missed out on additional monies.
The settlement terms prohibit Uber from terminating drivers at will. Instead, an Uber driver must receive several warning before being deactivated, and the company must establish an appeals process. This new position of power could be a problem for customers who opt not to tip, because they could end up with a low rating and drivers may begin to bypass passengers who are labeled “non-tippers.” This could also mean that customers may give drivers who request a tip a low rating and compromise their ability to pick up fares. Additional cash will also make the Uber driver an easy target for criminals.
The company must create an association that will act as a liaison between the company and drivers. Liss-Riordan believes that the battle has been won, but the war is still ongoing, because there has been no court decision regarding whether or not Uber drivers are contractors or employees.
The $100 million settlement is fluid because only $84 million is guaranteed, the remaining $16 million “is contingent on an increase in Uber’s future value,” and it still needs the approval of a federal judge. The settlement payout will depend on how many miles the Uber driver has driven. It is is estimated that a driver who has driven more than 25,000 miles will receive approximately $8,000.
Do you tip your Uber driver, and if not, what do you think of the new policy?
[Photo by Ted Warren/AP Images]