Victims were previously required to enter into confidentiality agreements as part of arbitration to settle claims, which prevented them from speaking publicly about the facts surrounding any sexual assault or harassment.
The company says the change is an attempt to bring "transparency, integrity, and accountability" to the way it handles workplace complaints.
But a CNN investigation found at least 103 Uber drivers in the US who had been accused of sexual assault or harassment by passengers over the past four years.
Not to be outdone, Lyft announced Tuesday it would also scrap its rules binding passengers and drivers to private arbitration and confidential settlements in cases involving allegations of sexual misconduct.
"This policy extends to passengers, drivers and Lyft employees", it said.
During a phone interview with CNN ahead of the Uber announcement on Tuesday, Uber's chief legal officer Tony West said "to be most effective we need everyone in the industry to really follow suit here, for us all to lock arms in this fight against sexual assault".
"It's one step toward making a change, but just bringing the issue into the open doesn't solve the problem", Christensen told Reuters.
Uber is now facing a class action lawsuit in the United States for poor driver vetting that has led to a series of sexual harassment incidents, including rape. That includes court proceedings like class-action lawsuits and other methods like mediation.
The letter, sent on behalf of 14 women, called upon Uber's board to drop the arbitration requirement to shine a light on abusive conduct.
Following CNN's investigation and the letter, Senator Richard Blumenthal, a Democrat from CT, challenged Uber's use of forced arbitration and in a letter to CEO Dara Khosrowshahi "respectfully requested" the company end the practice.
The forced arbitration allowed Uber to keep such allegations under wraps. She joined California lawmakers in April to introduce a state bill that would ban forced arbitration. "What's most important is for individual survivors to be able to tell their individual stories".