In a ruling many American delivery contractors will welcome coming up to Christmas, the state attorney general said the settlement will mean short-term workers are entitled to receive pay in lieu of missed breaks due to, for example, heavy workloads.
An employment tribunal is due to rule on whether Uber is acting within the law in not providing basic employment rights.
Drivers are independent, self-employed contractors rather than being directly employed by Uber, the firm said – its role is simply to connect supply (drivers) with demand (customers needing to get somewhere).
The tribunal will rule on two cases initially, paving the way for 17 further cases.
The rulings are likely to be closely monitored on both sides of the Atlantic by platform firms who use technology such as smart phones to provide flexible working to thousands of self-employed contractors.
This will be the first such ruling in the UK involving Uber, although it has attempted to settle similar cases in the US.
"The financial implications are certainly staggering if they have to pay the minimum wage and provide other employment benefits," employer lawyer Alex Mizzi of Howard Kennedy told the BBC.