Uber and Lyft reach agreement with Massachusetts on driver benefits

(Bloomberg) — Uber Technologies Inc. and Lyft Inc. agreed to a range of employment benefits to resolve a long-running state court case in Massachusetts challenging drivers’ employment status as independent contractors, halting the of companies to solve the problem. before voters in November.

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The companies will also pay a total of $175 million to the state to resolve allegations of violating Massachusetts wage and hour laws, state Attorney General Andrea Campbell said Thursday in a statement. Most of the funds will be distributed as back payments to current and former drivers who have been underpaid by the companies, she said.

Uber and Lyft will set a minimum wage standard for active driving time, offer paid sick leave and pay a cash stipend for health insurance, among other changes, Campbell said in the statement.

“We resolved historic liabilities by building a new operating model that balances flexibility and benefits,” Uber Chief Legal Officer Tony West said in a separate statement.

Campbell’s lawsuit against Uber and Lyft was at trial with closing statements expected on Friday. The settlement announced Thursday ends the case and “removes the ambiguity that some of these gig economy companies faced with the prospect of a significant wage and hour judgment against them,” said Joshua Nadreau, regional managing partner at Fisher & Phillips LLP. representing employers in classification cases.

As a result of the agreement, Uber and Lyft will withdraw their support for an industry-backed referendum on the 2024 state ballot that asks voters to solidify gig workers’ status as independent contractors.

Uber and Lyft have been seeking for years to reach agreements with unions and lawmakers in the U.S. that would provide new benefits to drivers while ensuring the companies can still classify them as independent contractors. This designation excludes workers from traditional labor rights, such as the minimum hourly wage and the ability to unionize.

Companies are eager to moderate rating issues through state-level negotiations as they seek to reduce overall costs to sustain their business model. Uber had hoped to model settlements in Massachusetts and other states on a similar deal it reached with the New York attorney general last year, which also keeps drivers classified as contractors.

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Uber’s legal tactics “effectively prevented any court from actually ruling on the issue of driver status, and this attorney general’s case was the only hope of actually getting a court ruling on this in Massachusetts,” said Shannon Liss-Riordan, plaintiff. lawyer who brought a landmark worker classification case against Uber in 2013. The settlement means “we will never get that answer, at least not in the near future,” she said.

The settlement offers immediate relief to drivers, according to an attorney with the district attorney’s office who worked on the case. That rules out a lengthy appeal by the companies if the state had won its lawsuit to classify the drivers as employees, the lawyer said, adding that the benefits negotiated by the parties are greater than what was proposed in the industry-backed ballot initiative.

The deal also clears a major political hurdle this year for gig companies, which await a ruling from the California Supreme Court on the fate of a 2020 voter-approved ballot measure that classifies drivers as contractors.

Under the Massachusetts settlement, Uber and Lyft will pay drivers a minimum of $32.50 per hour spent commuting to pick up a passenger and during the trip. This excludes waiting time between each trip. The companies will also provide chat support for drivers in multiple languages, including Spanish, French and Portuguese.

Lyft said it expects to make full payment on $27 million in arrears by the first quarter of 2025 and does not see any material impact on its guidance for 2024. It has accumulated $19.1 million in the first quarter of this year for payment and remaining amount will be accounted for in the second quarter, the company said.

–With help from Allie Reed.

(Updates with reaction to deal starting in fifth paragraph.)

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