Photo by John Gastaldo/San Diego Union-Tribune/TNS

By Carolyn Said, San Francisco Chronicle

Uber drivers will remain independent contractors and receive up to $100 million under a settlement announced late Thursday of class-action lawsuits pending in California and Massachusetts.

As part of the agreement, the company that connects passengers and drivers is now specifying how it decides to “deactivate” or terminate drivers and will give them more recourse to appeal being let go.

The drivers had sought to be reclassified as employees — something that Uber said would devastate its business model and hurt drivers’ flexibility to set their own schedules.

Uber is the most public face of the burgeoning new “gig economy” in which online marketplaces connect workers with customers for services such as rides, cleaning or errands. The rise of the sector has triggered a national discussion about whether gig workers should be entitled to the rights and benefits of employees. By putting the case behind it, Uber is free to concentrate on its global expansion and preparations for a public stock offering.

In fact, a Wall Street debut was part of the settlement deal. Uber will pay drivers $84 million now. Within a year of Uber going public or getting sold, if its value increases by 50 percent over its current $63.5 billion, it will pay the drivers another $16 million.

“It was smart of Uber to settle, and I think Uber got a good deal,” said Steven Davidoff Solomon, a law professor and co-director of the UC Berkeley Center for Law, Business and the Economy. “It’s not a gangbuster win for the plaintiffs, but they do get some benefits.” He noted that about a third of the settlement amount will go to attorney fees.

In an an unusually restrained blog post titled “Growing and growing up,” Uber CEO Travis Kalanick wrote, “As Uber has grown — over 450,000 drivers use the app each month here in the U.S. — we haven’t always done a good job working with drivers.

“For example, we don’t have a policy explaining when and how we bar drivers from using the app, or a process to appeal these decisions. At our size that’s not good enough. It’s time to change.”

Drivers had complained that deactivations sometimes seemed arbitrary and were linked to how many rides they accepted — a factor that should have been under their control if they were truly independent contractors. Uber said it would no longer deactivate drivers for declining trip requests, but may alert them if they have low acceptance rates and then sometimes log them out of the app for a limited time. A new peer review process will let drivers appeal deactivations to other drivers.

Uber will also fund drivers in the two states to create peer-led associations that can raise drivers’ concerns with Uber management on a quarterly basis. Another bone of contention for drivers is that Uber leads passengers to believe that tips are included in their fares. Uber will now make clear that that’s not the case and drivers will be permitted to put signs in their cars saying that “tips are not included, they are not required, but they would be appreciated.”

“We believe the settlement ... provides significant benefits — both monetary and non-monetary — that will improve the work lives of the drivers and justifies this compromise result,” said Shannon Liss-Riordan, the attorney for the drivers, in a statement. A jury trial with an eventual appeal to the U.S. Supreme Court likely was a risk that she chose not to take, she said.

The California case, O’Connor vs. Uber Technologies, was set to go before a jury in San Francisco federal court in June. The Massachusetts case is Yucesoy vs. Uber Technologies. Together, the two cases covered some 385,000 drivers who had ever worked for Uber in either state. The money will be allocated based on how much drivers worked.

Drivers who put in the most time behind the wheel, driving more than 25,000 miles since Uber’s start, could receive $8,000 on average, Liss-Riordan said.

U.S. District Judge Edward Chen must approve the agreement. A similar settlement between Lyft and about 100,000 California drivers for $12.25 million was rejected by U.S. District Judge Vince Chhabria on the basis that the amount shortchanged the drivers.

The settlement doesn’t carry any weight of a legal precedent and may not end the ongoing controversy about gig workers’ status. “It doesn’t settle the issue of contractors or employees,” Davidoff Solomon said.

However, it may be settled for Uber. “Uber now has learned how to restructure its arbitration agreements” to thwart class-action cases, he said.

©2016 the San Francisco Chronicle Distributed by Tribune Content Agency, LLC.