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"Uber Technologies and Lyft have agreed to pay drivers in Massachusetts a minimum wage and provide additional benefits while continuing to classify them as independent contractors. The settlement ends a years-long legal dispute and sets an important precedent for the gig economy.
As part of the agreement made with the Massachusetts Attorney General's office, drivers will receive guaranteed minimum earnings of $32.50 per active hour on ride, along with additional benefits such as paid sick leave based on the number of hours worked.
“For years, these companies have underpaid their drivers and denied them basic benefits. The agreement today holds Uber and Lyft accountable,” said the Attorney General of Massachusetts, Andrea Joy Campbell, in a statement.
Uber and Lyft will also pay a total of 175 million USD to the state to settle allegations that they violated labor and wage regulations. A large portion of this money will be distributed to the drivers.
This agreement is an example of what independent, flexible work with dignity should look like," said Tony West, Chief Legal Officer of Uber, in a statement.
The agreement comes after several U.S. states - from Washington to Minnesota - introduced minimum wage laws for ride-hailing service providers. Other places have attempted to increase the minimum wage for food delivery drivers, which has led to higher fees and lower demand.
Massachusetts sued Uber and Lyft in 2020, arguing that their drivers should be classified as employees rather than independent contractors and thus entitled to minimum wage and other benefits like overtime pay and sick leave. The companies then stated that they would support a referendum to let the state's voters decide.
This agreement ends the 2020 lawsuit, and the companies stated they would not pursue a referendum on the issue this year.
The new benefits in Massachusetts resemble those that companies offer drivers in California, where a successful referendum called Proposition 22 laid the groundwork for gig worker legislation across the country.
In 2020, California voters approved an industry-backed measure that exempted companies from classifying their drivers as employees. Prop 22 secured the drivers' status as independent contractors but also offered new earnings guarantees and additional benefits.
Uber drivers in California have been paying between 30 cents and 80 cents per ride since the enactment of Prop 22. Some costs in Massachusetts would also be passed on to passengers, with Uber refusing to say how the changes in Massachusetts would affect the company's bottom line.
Although the legality of Prop 22 is being challenged before the California Supreme Court, companies have used it to promote similar laws across the country.
In 2022, Washington passed a law that maintained companies' gig work models while providing drivers with new benefits. Earlier this year, companies in Minnesota reached an agreement on driver pay and some additional protections.
Last year, Uber and Lyft agreed to pay a total of $328 million to settle allegations by the New York Attorney General that the ride-hailing companies had cheated drivers out of their wages. This agreement also preserved the status of independent contractors while ensuring minimum earning guarantees and improvements in drivers' working conditions.
We are pleased to have reached an agreement that works for everyone and builds on similar progress in states like New York, California, Minnesota, and Washington," said Jeremy Bird, Executive Vice President for Rider Experience at Lyft, in a statement.
Uber Eats and its competitors in the food delivery sector report that their business has been impacted by new wage increases for couriers in New York City and Seattle. Uber Eats introduced a $4.99 fee per order in Seattle to cover the additional costs of paying drivers, which led to a 45% decrease in orders in the city last quarter compared to the previous year.
