Ride-share firms Uber and Lyft have agreed to pay drivers in Massachusetts a minimum of $32.50 per hour as part of a settlement in a lawsuit brought by the state, announced State Attorney General Andrea Joy Campbell announced on June 27.
Under the settlement terms, the two firms will also pay out a combined total of $175 million—Uber will pay $148 million, and Lyft $27 million—to the state to resolve allegations that the companies violated state wage and hour laws.
A substantial majority of that payment will be distributed to current and former drivers, the attorney general’s office said.
In addition, Uber and Lyft have agreed to provide drivers in the state with a host of benefits and protections, including paid sick leave at a rate of one hour of sick pay for every 30 hours spent en route or with a passenger in the vehicle, occupational accident insurance up to $1,000,000, and paid family medical leave insurance.
As part of the settlement, Uber and Lyft also agreed to cease participation in any funding or support for a proposed 2024 ballot initiative called Flexibility and Benefits for Massachusetts Drivers that would rewrite state law to define drivers as independent contractors.
Drivers Still Classified as Independent Contractors
However, as part of the deal, drivers will continue to be classified as independent contractors and not employees, marking a win for the ride-hailing giants.
The settlement resolves multiyear litigation against Uber and Lyft that first began in 2020 when the state alleged the companies improperly treated drivers as independent contractors who can legally receive lower compensation than employees.
Uber and Lyft, in defending themselves at trial, had argued that the Massachusetts attorney general’s office misunderstood their business models and that they are primarily technology companies that facilitate connections between drivers and potential customers, or riders, and not transportation companies.
In announcing the settlement, Ms. Campbell said Uber and Lyft have “underpaid their drivers and denied them basic benefits” for years.
“Today’s agreement holds Uber and Lyft accountable,” the attorney general said.
She also touted the work of her office, along with labor allies and drivers whom she said had helped secure a “standard of dignity for every driver across the state.”
Massachusetts Governor Maura Healey also welcomed the settlement, adding that the lawsuit against the two firms was “always about fairness for drivers.”
“I congratulate Attorney General Campbell and her team for securing this settlement that delivers historic wages and benefits to right the wrongs of the past and ensure drivers are paid fairly going forward,” she said.
In a statement confirming the settlement, Uber said the agreement “gives drivers access to new protections and benefits, including the nation’s first portable health insurance benefit fund, while preserving their ability to work independently.”
“In taking this opportunity, we’ve resolved historical liabilities by constructing a new operating model that balances both flexibility and benefits,” Uber said. “This allows both Uber and Massachusetts to move forward in a way that reflects what drivers want and demonstrates to other states what’s possible to achieve.”
Elsewhere, Jeremy Bird, Lyft executive vice president of driver experience, called the settlement a “huge win for Massachusetts drivers that secures their freedom to earn when, where, and however long they want.”
“Ride share is truly part of the economic and social fabric of the commonwealth,” Mr. Bird said.
The agreement builds on similar progress the company has made in states such as California, Minnesota, New York, and Washington, he said.
