Judge Rules Uber Can Settle with Customers over Tips

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Uber Technologies Inc. won permission to settle claims it misled consumers by charging them a 20 percent “gratuity” even though drivers got only about half of it.

U.S. District Judge Edward Chen in San Francisco on Thursday gave preliminary approval to a deal in which Uber will pay about $384,000 for 47,000 users of the ridesharing company’s app.

Passengers claimed that for a one-year period, Uber said on its website and in other marketing materials that it automatically charged users their metered fares plus a 20 percent tip for drivers. Uber didn’t pass along the full 20 percent, but instead took a cut of 40 percent to 50 percent of the tip for itself, according to the complaint.

Lawyers for consumers urged Chen to approve the settlement because Uber’s payment represents “essentially a full refund of the amount at issue in this suit,” according to a court filing. Uber collected about $860,000 from users for the gratuity charge, according to the filing.

Chen last month rejected Uber’s $100 million settlement of a lawsuit by drivers seeking to be treated as employees rather than independent contractors and compensated for unpaid expenses and tips.

The judge concluded the deal was unfair, partly because it low-balled potential claims under California law. He said he also wasn’t convinced that changing the company’s tipping policy would result in the “substantially increased income” for drivers as promised. The company and drivers have since told a federal appeals court they’ve resumed settlement negotiations.

The case is Ehret v. Uber, 14-00113, U.S. District Court, Northern District of California (San Francisco). The drivers’ case is O’Connor v. Uber Technologies Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco).