Uber and Lyft will pay Massachusetts drivers some of the highest guaranteed wages in the nation under a landmark deal with state prosecutors that also brought to a halt a years-long campaign seeking to rewrite how state law defines these workers.
Attorney General Andrea Campbell and the companies agreed to a $175 million settlement Thursday night that ends a nearly four-year lawsuit against Uber and Lyft, lays out a slew of new demands to protect wages, benefits and jobs and sidesteps the legal issue at the heart of the matter.
The deal provides a significant pay raise for tens of thousands of drivers and guarantees they will soon be able to access paid sick leave, work accident insurance and some health benefits — some of which, prosecutors claimed , companies unfairly did not provide years.
Uber and Lyft will no longer face the possibility of a judge declaring that their status quo agreement with drivers is illegal in Massachusetts, and they can continue to designate their drivers as independent contractors.
Both companies plan to continue offering rides in Massachusetts and signaled they don’t expect major impacts to operations. An Uber official said prices for riders could rise slightly, but added that the company has minimized disruptions in other states such as New York, where popular apps have been required to start paying drivers higher wages.
“For years, these companies have underpaid their drivers and denied them basic benefits,” Campbell said in a statement. “Today’s settlement holds Uber and Lyft accountable and provides their drivers, for the first time in Massachusetts, with a guaranteed minimum wage, paid sick leave, workplace accident insurance and paid health care.”
Changing the political landscape this summer and fall, the settlement also caused gig economy power players to suspend their campaign on a ballot issue that would have defined executives as independent contractors instead of employees.
Uber and Lyft agreed in the settlement to “cease participating in any funding or support” of the voting issue.
Instacart and DoorDash were also part of the coalition working to change the driver’s status in state law and could have tried to continue the fight on their own. However, a campaign spokesman confirmed Thursday evening that supporters no longer plan to put a question on the Nov. 5 ballot.
It was an unexpected reversal for the industry-backed campaign, which has already spent about $45 million trying to get voters to change the state law in their favor. On Thursday morning, the state’s highest court approved the measure to appear on the ballot. Nine and a half hours later, the mass was officially dead.
Under the agreement, Uber and Lyft must pay their drivers at least $32.50 an hour when the workers are either on the road picking up passengers or actively transporting riders to a location. Companies aren’t required to pay for the time drivers are logged into an app, but neither have a passenger in their vehicle nor are they driving to pick someone up. These salaries are due to start on August 15 and will be adjusted annually for inflation.
The rate is significantly higher than in some other states. In New York, drivers outside of New York City earn at least $26 an hour for the time between accepting a ride and completing a ride (the same amount of time that would be compensated in Massachusetts).
Drivers here will also begin accruing up to 40 hours a year of paid sick leave, offered at a rate of $20 an hour, and Uber and Lyft agreed to take on-the-job accident insurance for drivers.
The companies will also offer “portable health funds,” which are cash wages that drivers can use to pay for eligible health insurance plans, starting next year. Uber called it “the nation’s first portable health insurance benefit fund.” They will also provide drivers with pay to buy into the state’s paid family and sick leave program.
Other parts of the agreement call for Uber and Lyft to provide drivers with more information about rides and expected earnings before accepting a ride, support for in-app chat in multiple languages and an appeals process to challenge deactivations.
Uber will pay Massachusetts $148 million and Lyft will pay the state $27 million, most of which will go to current and former drivers in compensation. Campbell’s office said it will announce details about who qualifies for the payments and how to apply in the coming weeks.
Labor leaders celebrated the deal. In a statement provided by Campbell’s office, Massachusetts AFL-CIO President Chrissy Lynch stated, “Uber and Lyft’s free ride is over.”
“This settlement includes a comprehensive package of pay, benefits and strong executive protections that these corporations have taken advantage of for years. We deeply appreciate AG Campbell’s hard work to hold these corporations rightfully accountable to the laws of employment in Massachusetts,” Lynch said.
The parties filed the settlement agreement just before 5:00 p.m. Thursday, ahead of closing arguments in the trial. His filing immediately ends court proceedings, preventing Judge Peter Krupp from issuing a ruling that could have declared Uber and Lyft in violation of or in compliance with existing labor law.
The agreement does not take a position on how drivers should be classified, effectively allowing companies to continue treating drivers as contractors, but with new wage and benefit requirements.
“This agreement is an example of what independent, flexible work with dignity should look like in the 21st century. We are excited to see more policymakers supporting portable benefits and innovative frameworks to improve independent work, Uber Chief Legal Officer Tony West said in a statement. blog post. “By seizing this opportunity, we’ve resolved historical liabilities by building a new operating model that balances flexibility and benefits. This allows Uber and Massachusetts to move forward in a way that reflects what drivers want and shows other states what it is possible to achieve.”
Lyft Executive Vice President of Driver Experience Jeremy Bird described the settlement as “a huge win for Massachusetts drivers that ensures their freedom to earn when, where and for as long as they want.”
Massachusetts becomes the latest state to reach a legal or legislative compromise with Uber and Lyft, which spent years lobbying and campaigning to reshape state laws in their favor.
In 2022, Uber paid New Jersey $100 million in back taxes after officials there alleged the company misclassified its drivers as independent contractors. Late last year, the two companies collectively paid $328 million in a New York wage theft settlement that also required Uber and Lyft to provide drivers with paid sick leave and new minimum wage standards. And in May, Minnesota passed a new law requiring Uber and Lyft to increase what they pay drivers and offer new protections, a compromise after Minneapolis tried to impose even bigger fee increases on the companies.
Former Attorney General Maura Healey, who is now governor, sued Uber and Lyft in 2020, alleging that they inflated their profits for years by treating drivers like contractors and denying them the wages and benefits they deserve. owed to employees.
“Our lawsuit against Uber and Lyft was always about justice for drivers,” Healey said Thursday, adding that the settlement “provides historic wages and benefits to right the wrongs of the past and ensure drivers are paid fairly in continuation”.
The case languished on the back burner for nearly four years before a court trial began last month.
Stakeholders in the debate over app-based driver pay and benefits for years have been unable to push reform measures through the Legislature, or change the state’s independent contractor law, prompting the parties to try to reconcile differences in the courts or through ballot questions.
Senate President Karen Spilka praised Campbell’s team for “persistence” in negotiating the settlement and said she was “outraged to see millions going to be paid out to former drivers who were denied these basic benefits for years.”
“For too long, TNC leaders have been denied access to the policies enacted to protect our working residents. I am thrilled to see that the AG’s tireless efforts have resulted in this historic settlement extending those protections to Uber and Lyft drivers,” Spilka said. .