SAN FRANCISCO • Uber has long been embroiled in a debate over the status of its drivers: Should they be independent contractors or full- time employees?

Uber says that as independent contractors, its drivers get flexibility. Their freelancer status also lets the company sidestep the costs of full- time workers, including paying minimum wage. But labour groups and lawyers have argued that Uber drivers should be classified as employees to receive worker protections.

On Thursday, the firm reached a settlement in a pair of class-action lawsuits in California and Massachusetts that will let it continue to categorise drivers in those states as independent contractors.

The settlement is a significant victory for Uber. By keeping its drivers as contractors, the San Francisco- based company can keep costs low. And while the settlement applies only to two states and is non-binding elsewhere, the agreement and the changes that Uber is adopting may influence regulators in other places.

"Drivers value their independence... to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours," Uber chief executive Travis Kalanick said in a blog post. "That said, as Uber has grown - over 450,000 drivers use the app each month here in the US - we haven't always done a good job working with drivers. It's time to change."

Under the settlement, filed in the United States District Court in the Northern District of California, Uber will pay as much as US$100 million (S$135 million) to the roughly 385,000 drivers represented in the cases. Uber also agreed to several concessions to appease driver concerns, including giving more information on how and why drivers are banned from using the app.

The agreement - subject to approval by the presiding judge - says Uber must pay US$84 million to the plaintiffs. Uber will dispense an additional US$16 million if it holds an initial public offering and its average valuation rises to 11/2 times that of its last financing round. Last December, Uber was valued at US$62.5 billion, making it the most valuable private technology firm in the world.

The class-action suits were originally filed in 2013 and became the biggest suits in terms of the number of drivers represented. Uber still faces litigation about driver status in states such as Florida and Arizona.

Worldwide, Uber and other ride- hailing apps, which have exploded in popularity in recent years, are in a battle with regular taxi operators. In Singapore, private hire car drivers like those operating under Uber will soon be required to have a vocational licence, as well as go for medical tests and background screenings under regulations expected to be announced next month.

Uber said many of the announced changes were a part of its overall maturation process, as it has grown from a small start-up to a global organisation in roughly six years.

Yet many of Uber's policy changes appear designed to defuse the plaintiffs' arguments that drivers should be deemed employees rather than independent contractors.

In a statement, Ms Shannon Liss- Riordan, the lawyer representing the drivers, said: "Importantly, the case is being settled - not decided.

"This case, however... stands as a stern warning to companies which play fast and loose with classifying their workforce as independent contractors."

NEW YORK TIMES