News & Commentary

April 22, 2016

Today’s major news is Uber’s settlement of two class action lawsuits covering 385,000 drivers in California and Massachusetts.  Both the New York Times and Wall Street Journal provided detailed coverage on the settlement, under which Uber will continue classifying drivers as independent contractors.  In return, Uber must pay $84 million to the plaintiffs represented in the class action.  An additional $16 million is due if Uber holds an initial public offering and the company’s average valuation increases 1.5 times that of its last financing round.  The company was valued at $62.5 billion in December 2015.  Also as part of the settlement agreement, Uber must relinquish some control over drivers “in two areas where critics have argued that the Uber-driver relationship looks like hiring and firing.”  For instance, Uber will no longer be able to kick drivers off the platform without explanation.  Nor will it be able to deactivate drivers who regularly decline to accept ride requests.  The company has also agreed to provide drivers with more information about the user ratings system and is testing a peer-reviewed appeals process for drivers who believe they have been deactivated unfairly.  The WSJ cast these modest compromises as a long-term victory for Uber: Had the company gone to trial and lost, it would have had to reclassify its drivers as employees, a move that would have cost up to billions of dollars in minimum wage compliance, Social Security contributions, and health benefits.  The settlement agreement is pending approval by Judge Edward M. Chen, and Uber still faces similar lawsuits over driver status in Florida, Arizona, and Pennsylvania.

The NYT also reported that the National Credit Union Administration, alongside five other federal agencies, has released rules to limit how big financial institutions compensate their top executives.  Although the Dodd-Frank Act required the six agencies to propose stricter pay rules within 90 days of the Act’s passage, the initial draft released in 2011 was “widely panned as being too weak.”  For instance, the 2011 draft proposed that the largest banks withhold at least 50 percent of incentive-based pay for three years.  The current draft proposes that banks withhold 60 percent for four years and applies the holdout provision to a wider scope of employees, not only the top executives.  The proposals also contain measures for banks to reclaim bonuses from bankers who took risks that led to large financial losses.  One executive-compensation expert observed that the new rules will not have a large impact, as they merely codify industry practices that have already been evolving over the past eight years.  The public can comment on the proposed rules until July.

The National Labor Relations Board issued a “stinging” report detailing how University of Southern California officials violated federal labor rules by interfering with a vote to decide whether faculty members should unionize.  According to the LA Times, the NLRB report detailed how USC “undermined the possibility of a free and fair election” by offering raises to some non-tenure-track faculty members shortly before the vote in January.  The report also accused USC of threatening that faculty members who voted to unionize would not be welcome to serve on various university governance committees.  In January, non-tenure-track faculty at the Dornsife College of Letters, Arts and Sciences voted 127 to 113 against joining the Service Employees International Union Local 721.  In light of the unfair labor practices, the NLRB report recommends a revote.  USC officials will have until Monday to file objections to the report, at which point the Board’s regional director will decide whether to schedule a new unionization vote at Dornsife.  Meanwhile, faculty of two other schools within USC has voted to join SEIU.  In the past three years, more than 10,000 faculty members nationwide—including those at Duke, Georgetown, and Tufts—have joined SEIU.

SEIU’s negotiations with Airbnb fell apart after intense nationwide backlash from labor and housing activists, reported the Guardian.  Airbnb and the SEIU had been in “advanced negotiations” toward a deal under which the company reportedly would have endorsed a $15 minimum wage for house cleaners and encouraged hosts to hire cleaners paid that rate.  Critics argued that the deal would have done little to support low-wage workers and could even have driven some house cleaners to hotels that engage in illegal labor practices.  Airbnb has also faced criticism that it reduces the availability of affordable housing in cities by converting permanent housing into lucrative short-term rental properties.

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