Judge Rejects $100M Settlement Agreement Between Uber and Drivers

— -- A federal judge in California has rejected a settlement agreement between on-demand car service Uber and two drivers who brought a class-action lawsuit against the company, alleging unfair treatment after being classified as independent contractors rather than employees.

The agreement between the two parties, “as a whole, is not fair, adequate and reasonable,” Judge Edward Chen said Thursday.

The agreement could have resulted in up to $100 million being distributed among 380,000 drivers in California and Massachusetts to settle their claims that Uber has taken advantage of them. Uber, according to court documents, had agreed to pay $84 million to about 380,000 drivers, and another $16 million depending on the success of its planned initial public stock offering.

In a statement, a spokesman for privately held Uber said: “The settlement, mutually agreed by both sides, was fair and reasonable. We’re taking a look at our options.”

In an emailed statement, a lawyer for the drivers left the door open for a new settlement agreement, but said she would not hesitate to take the case to trial. A trial could see the number of drivers entitled to any payout reduced to about 8,000, because so many did not opt out of arbitration agreements, she said.

The case, like others involving Uber and other companies, revolves largely around Uber’s classification of drivers as independent contractors rather than employees. As contractors, the drivers are, more or less, freelancers who are not entitled to the same protections under the law.

Uber has argued that because it does not set drivers’ work schedules, they are not employees. The drivers, according to court documents, argue they are employees because Uber "exercised considerable control and supervision over the methods and means of its drivers'...transportation services."

If drivers were classified as employees, the judge wrote, they would be entitled to reimbursement for gas and other expenses related to their vehicles under California law.

The now-rejected settlement recognized "that drivers should remain as independent contractors, not employees."

Chief among Chen’s concerns, according to the AP, was the drivers' inability to pursue other claims against Uber, under terms of the settlement. The judge said those claims could have seen another $1 billion awarded to the claimants in a trial.

Additionally, Chen was skeptical that the IPO would be successful enough to meet conditions for the $16 million figure to be released to the plaintiffs, the AP reported.

Classifying drivers as employees could mean a surge in the company’s expenses, which might threaten its plans to offer stock to the public, according to The Associated Press.

A recent similar case, the AP reported, involving Lyft (another ride service, rival to Uber) saw a settlement agreement rejected before the approval of a revised settlement.

ABC News' Susanna Kim as well as the Associated Press news agency contributed to this report.