Uber and Lyft will pay Massachusetts drivers some of the highest guaranteed wages in the country in a landmark deal with state prosecutors that also ended a years-long campaign to rewrite how state law defines these workers.
Attorney General Andrea Campbell and the companies agreed Thursday evening to a $175 million settlement that ends the nearly four-year-old lawsuit against Uber and Lyft, sets out a series of new requirements on wages, benefits and job protection, and avoids the legal issue at the heart of the case.
The deal guarantees a sizable pay raise for tens of thousands of drivers and will soon give them access to paid sick leave, workers’ compensation insurance and some degree of health benefits – some of which , prosecutors say, were unfairly omitted by the companies for years.
Uber and Lyft will no longer face the prospect of a judge ruling that their standstill agreement with drivers is illegal in Massachusetts, and they will be able to continue to characterize their drivers as independent contractors.
Both companies plan to continue offering rides in Massachusetts and have indicated that they do not expect any major impact to their operations. An Uber official said prices for riders may rise slightly, but added that the company has minimized disruption in other states like New York, where popular apps have been forced to start paying wages higher to drivers.
“For years, these companies have underpaid their drivers and denied them basic benefits,” Campbell said in a statement. “Today’s agreement holds Uber and Lyft accountable and provides their drivers, for the first time ever in Massachusetts, with a guaranteed minimum wage, paid sick leave, workers’ compensation insurance and benefits. health care. »
Changing the political landscape this summer and fall, the settlement also prompted powerful players in the gig economy to suspend their campaigning on a ballot question that would have defined drivers as independent contractors rather than employees.
Uber and Lyft agreed in the settlement to “cease any and all funding or support” for the ballot question.
Instacart and DoorDash were also part of the coalition seeking to change driver status in state law and could have tried to continue the fight on their own. However, a campaign spokesperson confirmed Thursday night that supporters no longer plan to submit a question for the Nov. 5 ballot.
It’s a stark turnaround for the industry-backed campaign that has already spent about $45 million urging voters to change state law in their favor. On Thursday morning, the state’s highest court allowed the bill to appear on the ballot. Nine and a half hours later, the proposal was officially abandoned.
Under the agreement, Uber and Lyft must pay their drivers at least $32.50 an hour when workers are en route to pick up passengers or actively transporting passengers to a location. Companies are not required to pay for the time drivers are logged into an app but do not have a passenger in their vehicle or travel to pick someone up. These salaries are due to start on August 15 and will be adjusted annually for inflation.
The rate is considerably higher than in some other states. In New York, drivers outside of New York City earn at least $26 per hour for the time between accepting a ride and completing it (the same amount of time that will be paid in Massachusetts).
Here, drivers will also begin accruing up to 40 hours a year of paid sick leave, at a rate of $20 an hour, and Uber and Lyft have agreed to get workers’ compensation insurance for drivers .
The companies will also offer “portable health funds,” which are cash stipends that drivers can use to pay for eligible health insurance plans, starting next year. Uber called it “the nation’s first portable health insurance fund.” They will additionally provide drivers with stipends to join the state’s paid family and medical leave program.
Other parts of the deal include Uber and Lyft providing drivers with more information about expected rides and earnings before accepting a ride, in-app chat support in multiple languages, and a process call to contest deactivations.
Uber will pay $148 million to Massachusetts and Lyft will pay $27 million to the state, most of which will go to current and former drivers as compensation. Campbell’s office said he will announce details in the coming weeks about who is eligible for the payments and how to apply.
Union leaders welcomed the agreement. In a statement provided by Campbell’s office, Massachusetts AFL-CIO President Chrissy Lynch said, “The Uber and Lyft free ride is over. »
“This agreement includes a comprehensive package of high wages, benefits and protections for the drivers these companies have exploited for years. We deeply appreciate Attorney General Campbell’s hard work in holding these companies rightly accountable to Massachusetts employment laws,” Lynch said.
The parties filed the settlement agreement shortly before 5 p.m. Thursday, on the eve of closing arguments in the trial. Its submission immediately ends the court proceedings, preventing Judge Peter Krupp from issuing a ruling that could have found Uber and Lyft in violation of or in compliance with applicable labor laws.
The agreement takes no position on how drivers should be classified, allowing companies to continue treating drivers as contractors but with the new wage and benefit requirements.
“This agreement is an example of what independent, flexible, and dignified work should look like in the 21st century. We’re excited to see more policymakers supporting portable benefits and innovative frameworks to improve independent work,” Uber Chief Legal Officer Tony West said in a blog post. “By seizing this opportunity, we’ve addressed historical liabilities by building a new operating model that balances both flexibility and benefits. This allows Uber and Massachusetts to move forward in a way that reflects what drivers want and shows other states what’s possible.”
Jeremy Bird, Lyft’s executive vice president of driver experience, described the deal as “a huge win for Massachusetts drivers that ensures their freedom to earn money whenever, wherever and for as long as they wish.”
Massachusetts becomes the latest state to reach a legal or legislative compromise with Uber and Lyft, which have spent years lobbying and campaigning to reshape state laws in their favor.
In 2022, Uber paid $100 million in back taxes to New Jersey after officials there alleged the company misclassified its drivers as independent contractors. Late last year, the two companies collectively paid $328 million in a wage theft settlement in New York that also required Uber and Lyft to offer drivers paid sick leave and new minimum wage standards. And in May, Minnesota enacted a new law requiring Uber and Lyft to increase what they pay drivers and offer new protections, a compromise after Minneapolis sought to impose even bigger fare increases on the companies.
Former Attorney General Maura Healey, now governor, sued Uber and Lyft in 2020, alleging they inflated profits for years by treating drivers like contractors and denying them wages and benefits owed to employees.
“Our lawsuit against Uber and Lyft has always been about fairness for drivers,” Healey said Thursday, adding that the deal “provides historic wages and benefits to right past wrongs and ensure drivers are paid fairly in the future.
The case dragged on behind the scenes for almost four years before a court trial began last month.
Stakeholders in the years-long debate over pay and benefits for app-based drivers have been unable to pass reform measures through the Legislature or change the state’s independent contractor law, leading the parties to try to reconcile their differences in court or through ballot questions.
Senate President Karen Spilka praised Campbell’s team for its “perseverance” in negotiating the deal and said she was “encouraged to see that millions will be paid to former drivers who were deny these basic benefits for years.”
“For too long, TNC drivers have been denied access to policies put in place to protect our working residents. I am pleased to see that the Attorney General’s tireless efforts have resulted in this historic agreement to extend those protections to Uber and Lyft drivers,” Spilka said.