The deal keeps Uber drivers in California and Massachusetts as independent contractors, a distinction said to be crucial to the burgeoning transportation network company market that has disrupted the classic taxi market in major cities worldwide.
Drivers who brought the lawsuit claimed they were actually employees entitled to employee benefits, including reimbursement of gasoline and other expenses, according to the Reuters news service.
The deal still must be accepted by Judge Edward Chen of the U.S. District Court for the Northern District of California in San Francisco.
The deal also is subject to disapproval by federal labor regulators, Reuters said.
But the case, which was scheduled to begin trial in June, had been closely watched not only by traditional taxi companies but by companies across the technology sector, which have grown accustomed to the lower-priced, on-demand service the rideshare companies offered.
“We realize that some will be disappointed not to see this case go to trial,” said Shannon Liss-Riordan, an attorney representing the drivers.
More than 80 percent of the proposed settlement was guaranteed to drivers.
Uber CEO Travis Kalanick said his company had agreed to change some of employment practices that drivers had complained about, including a practice of terminating drivers they viewed as arbitrary.
Uber also agreed to help start a drivers’ association in both states, Reuters said.
The agreement is similar to an agreement reached earlier this year with Lyft drivers.
More than 450,000 drivers get passengers through Uber every month, Kalanick said.
Uber is by far the largest rideshare company in the world, Reuters said.
Other companies in the sector include Lyft, Sidecar, which has recently started to focus on deliveries, and many others.
