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Uber settles disputes with thousands of US drivers ahead of IPO; says use of cash raises concerns in India and elsewhere

Ride-hailing company Uber revealed in a regulatory filing on the eve of its IPO that it has reached settlements with tens of thousands of US drivers over their employment status, and expects to spend $146 million to $170 million on the settlements. The company also said that the use of cash in certain countries, including India, raised several regulatory and safety concerns. Uber said it had already set aside $132 million anticipating a settlement after more than 60,000 drivers in the US had either already demanded or were going to demand that they be classified as employees and not independent contractors. Uber said it had reached settlements with a “large majority” of them. The company said it continued to believe its drivers are independent contractors as they can decide on their own when they want to work for Uber and can work for competitors such as Lyft as well. Uber’s business model depends on its drivers being classified as contractors; as employees, they would be entitled to benefits such as health insurance and overtime pay.

“We are involved in numerous legal proceedings globally, including class action lawsuits, demands for arbitration, charges and claims before administrative agencies, and investigations or audits by labor, social security, and tax authorities,” Uber wrote, adding that “the costs associated with defending, settling, or resolving pending and future lawsuits (including demands for arbitration) relating to the independent contractor status of drivers could be material to our business”. The company’s filing came a day after Uber and Lyft drivers in the US staged a strike, demanding liveable incomes, job security and regulated fares among other things, per the New Indian Express.

Cash concerns in India, Brazil, Mexico and elsewhere

Uber also said in the filing that the use of cash in certain countries, including India, Brazil and Mexico, raises several regulatory, operational and safety concerns. Failing to comply with these regulations could attract significant fines and even prompt a regulator to suspend Uber’s operations in those jurisdictions, the company said. In addition, the use of cash for ride-sharing and Uber Eats can increase security risks for its drivers and riders, Uber said, making them vulnerable to robbery and assault. “If we are not able to adequately address any of these concerns, we could suffer significant reputational harm, which could adversely impact our business,” Uber wrote. In 2018, cash-paid trips accounted for about 13% of Uber’s global gross bookings, the company said. In April, PayPal had said that it planned to invest $500 million in Uber ahead of the ride-hailing firm’s IPO. It also extended the partnership between the two companies, which goes back to 2013. As part of the extension, PayPal said it would look into “future commercial payment collaborations, including the development of Uber’s digital wallet”, PayPal president and CEO Dan Schulman wrote on LinkedIn.

Uber prices IPO at $45 a share

On Thursday, Uber priced its initial public offering at $45 a share, CNN reported. At that price, it would raise $8.1 billion and command a valuation of about $82 billion, making it one of the largest US IPOs ever.

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