A $100m (£76m) settlement between ride-sharing app Uber and some of its drivers has been rejected by a US judge.
The deal, agreed by Uber, would have seen the money shared among about 380,000 drivers and stave off a class action lawsuit.
The action is linked to claims that Uber has been treating drivers as independent contractors instead of employees, with the lawsuit contending that they should be compensated for expenses such as petrol.
The 100 million US dollar settlement would have kept the status quo, where drivers are classified as independent contractors.
But district judge Edward Chen declared the deal unfair, a decision that complicates Uber’s efforts to remove the legal threat of having its drivers classified as employees.
The distinction would give Uber’s drivers more rights and benefits, in turn forcing the company to change its business in ways that would cause its expenses to soar.
Uber expressed its disappointment with the ruling, adding that it will consider its options.
The alternatives include taking the case to trial, awaiting rulings in two appeals that would bolster Uber’s cause or negotiating a revised settlement with the drivers.
In the UK, Uber is also embroiled in court action, having launched a legal challenge against new Transport for London regulations that require thousands of its drivers to pass an English language test.