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Judge Overturns Uber’s Settlement With Drivers

SAN FRANCISCO — A federal judge on Thursday struck down a proposed class-action settlement between Uber and a group of its current and former drivers, potentially continuing a protracted lawsuit that questioned a key tenet of the ride-hailing company’s business.

Under a settlement forged in April, Uber had been set to pay up to $ 100 million in reimbursement damages to nearly 400,000 drivers. The drivers first sued Uber in 2013, claiming that they should have been classified as employees rather than independent contractors of the company. Uber has opposed having its drivers be categorized as employees, a more costly designation that would require the company to pay payroll taxes and ensure that drivers earn at least the minimum wage.

In documents filed in Federal District Court for Northern California on Thursday, Judge Edward M. Chen ruled that the April settlement was “not fair, adequate, and reasonable” as grounds for denial. He also said a small portion of the $ 100 million amount reflects only 0.1 percent of the potential full verdict value of the case.

The decision is a blow to Uber in a longstanding battle with its drivers, many of whom have argued that the type of control Uber exerts over them constitutes conditions of employment. As employees, Uber drivers would be entitled to reimbursement for expenses and vehicle maintenance, costs that as independent contractors they now pay themselves.

As part of the settlement agreement, Uber also made other concessions, like recognizing and speaking with quasi-unions of its drivers in New York and other states. It also allowed drivers to accept tips at the end of each ride.

Uber had hailed the settlement as a victory for drivers who wanted to maintain flexibility in their roles. But others said the reimbursement amount was far too low. Uber is valued at $ 62.5 billion, and in June it raised $ 3.5 billion from Saudi Arabia’s Public Investment Fund; the company also recently agreed to sell off its China operations to the Chinese ride-hailing company Didi Chuxing.

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

Shannon Liss-Riordan, the lawyer representing the plaintiffs in the suit, did not immediately respond to a request for comment.

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