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Uber Technologies tentatively agreed to pay $10 million and change its compensation and promotion practices to settle claims that it discriminated against approximately 420 software engineers nationwide based on their sex, race, and/or national origin.
The March 26 preliminary settlement would bring an end to two California cases—one in federal court, the other in state court—that accused the ride-hailing giant of hiring female software engineers and engineers of color at lower job levels than their credentials warranted and paying them less than their white and Asian counterparts for the same work. Uber was also accused of providing female software engineers and engineers of color with systematically biased performance reviews, which caused them to be promoted at a slower rate than white and Asian software engineers.
The lawsuits also said Uber subjected female software engineers and engineers of color to a hostile work environment that was “condoned and even encouraged” by the company’s top executives.
The lawsuits are just two of many to challenge hiring, pay, and promotion practices in the technology sector. Alphabet Inc.’s Google, for example, has been hit with similar lawsuits by workers, as has Microsoft. Google and Oracle additionally have faced inquiries by the federal government into their pay and hiring practices.
“We are very pleased with the result” because $10 million “is a very substantial amount of money to compensate the 420 class members for past discrimination and harassment, and because the injunctive relief demonstrates Uber’s willingness to turn the page on its past and engage in real reforms to prevent discrimination and harassment in the future,” one of the software engineers’ attorneys told Bloomberg Law in a March 27 email.
“The settlement and voluntary reforms included in it send a strong signal that Uber is taking steps to achieve a truly meritocratic approach to training, evaluating, compensating, promoting, and retaining software engineers regardless of gender, race, ethnicity, or other trait,” Jahan Sagafi said. Sagafi is a partner with Outten & Golden in San Francisco.
“This settlement involves claims dating back to July 2013 and, while we are continually improving as a company, we have proactively made a lot of changes since then,” an Uber spokesman told Bloomberg Law. “In the past year alone we have implemented a new salary and equity structure based on the market, overhauled our performance review process, published our first Diversity & Inclusion report and created and delivered diversity and leadership trainings to thousands of employees globally,” he said in a March 28 email.
The proposed settlement was reached following informal class discovery and a full day of negotiation before a neutral mediator, a March 26 unopposed motion seeking preliminary federal court approval of the settlement says. The state court action is “stayed"—legal speak for being held inactive—pending approval of the proposed settlement and will be dismissed following final court approval of the pact, the motion says.
The $10 million class fund will be used to make individual awards to the workers in four separate subclasses, to pay their attorneys, and to cover other costs related to the lawsuits. The settlement also requires Uber to undertake significant prospective measures to eradicate bias against female software engineers and engineers of color, the motion says.
Those measures include the development of minimum standards for the five types of software engineering positions held by the various class members, implementation of a validated promotion assessment process, and provision of mentorship and skill development for class members.
Uber also will count toward future cash bonuses for female software engineers and engineers of color all work they do to advance diversity and inclusion at the company. And the company must check at the end of each performance review cycle that female software engineers and engineers of color weren’t inadvertently disadvantaged, the motion says.
“Hopefully the injunctive relief will be a model for other tech companies that take seriously their obligation to be fair to their workers,” Sagafi said. “And these improvements to employment processes help companies increase productivity by eliminating discrimination and harassment, which are barriers to rational, meritocratic reward systems.”
Uber’s compliance with the injunctive relief provisions of the settlement will be monitored by class counsel for three years, the motion says.
The overhaul of its performance review process includes the introduction of goal-setting during midyear reviews and greater emphasis on the quality of feedback and development employees receive, according to Uber.
The allegedly biased performance ratings at Uber resulted from the company’s use of a stack ranking system that involved managers across the company rating and ranking employees under their supervision on a calibrated curve, with only a set small percentage of their employees capable of being rated as top performers, the lawsuits alleged.
Those “arbitrary cutoffs” among workers who performed similarly was implemented in a manner that disadvantaged female software engineers and engineers of color, according to the lawsuits.
Similar employee evaluation systems, which are also known as “forced ranking,” previously have led to complaints of discrimination against other employers.
Uber’s forced ranking system further resulted in female software engineers and engineers of color having their pay “dragged down,” and it made it harder for them to gain promotion and otherwise advance their careers, the motion for preliminary approval of the settlement says.
The $10 million class fund “is an excellent result in light of the total potential exposure, because there were many hurdles the class members would have had to clear to achieve the best case scenario,” Sagafi said.
Of that $10 million, up to $3.17 million will be available to pay class counsel’s attorneys’ fees and legal costs. It also will be used to pay named plaintiffs Roxana del Toro Lopez and Ana Medina $50,000 and $30,000, respectively, for serving as representatives of the class.
Another $50,000 of the class fund will go to address claims under California’s Private Attorneys General Act, which were filed with the California Labor and Workforce Development Agency by a subclass of all women and people of color who work or worked for Uber in one of the software engineer positions in California between June 22, 2016, and preliminary approval of the pact. The agency will receive 75 percent of the amount, and a group that acted as representatives of the subclass will receive the other 25 percent, the motion says.
Outten & Golden’s Rachel W. Dempsey and Laura I. Mattes in San Francisco and Adam T. Klein and Rachel M. Bien in New York also represent the proposed subclasses. Nancy L. Abell in Los Angeles and Paul W. Cane Jr. and Jullie Z. Lal in San Francisco, all of Paul Hastings LLP, represent Uber.
The case is Del Toro Lopez v. Uber Techs., Inc., N.D. Cal., No. 4:17-cv-06255, motion seeking preliminary approval of settlement 3/26/18.
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