A settlement between the taxi-hailing app Uber and some of its drivers has been rejected by a US judge.
The $100m (£75m) deal had been agreed after legal action on behalf of around 385,000 Uber drivers, who claimed that they should be classed as employees and entitled to expenses.
However, a San Francisco judge has ruled that the settlement was “not fair, adequate or reasonable”.
Uber said the decision was disappointing.
“The settlement, mutually agreed by both sides, was fair and reasonable. We’re disappointed in this decision and are taking a look at our options,” the company said.
Under the agreement, Uber had agreed to pay the drivers, based in California and Massachusetts, $84m initially.
They would then receive another $16m if the company decided to go public and its valuation increased one-and-a-half times from its December 2015 valuation within the first year.
Crucially for Uber, it meant the drivers were still classified as contractors and not employees.
The company has introduced policy changes as a result of the case – agreeing to create and fund a driver’s association in both states, as well as providing them with more information about why a driver may have been “deactivated”, as well as piloting an appeals process.
At the time of the agreement, the lawyer representing the drivers said it was an “historic” agreement and “one of the largest ever achieved on behalf of workers claiming independent contractor misclassification”.
Analysis: Dave Lee, North America technology reporter
The frustrating thing for Uber is that it thought it had pleased everyone.
But a judge disagreed – taking issue with a settlement that came with strings that shouldn’t have been attached, such as a stipulation that some of the settlement money would only be paid out if Uber’s valuation rose above a certain level, if and when it floats on the stock market.
Still, you don’t need a crystal ball to know how this one is going to be resolved. Uber will solve this like it solves all of its problems: by throwing more money at it. That worked for ride-sharing rival Lyft who, after facing a lawsuit of its own over the same issue, simply doubled its offer when a judge initially said no.
I can’t see the employee/contractor row being an ongoing problem for Uber.
When this case first arose I spent the day chatting to Uber drivers waiting for punters arriving at San Francisco airport.
Among them, I didn’t find any drivers who wanted to be considered employees rather than contractors, as the flexibility they felt it gave them made the loss of employee benefits a worthwhile sacrifice.