Uber and Lyft reached a $175 million settlement with Massachusetts Attorney General Andrea Campbell’s office to resolve a multi-year lawsuit that targeted the classification status of drivers working for the two companies, according to a statement released Thursday afternoon.
The agreement, which Campbell pitched as “nation-leading,” will see Uber and Lyft agree to raise their minimum pay to $32.50 per hour, offer a “suite of benefits and protections for drivers,” and effectively end their financial backing of a ballot question push on the matter in Massachusetts.
“For years, these companies have underpaid their drivers and denied them basic benefits. Today’s agreement holds Uber and Lyft accountable, and provides their drivers, for the very first time in Massachusetts, guaranteed minimum pay, paid sick leave, occupational accident insurance, and health care stipends,” Campbell said in a statement.
The case has played out over the past month in Suffolk County Superior Court and was first filed by then-Attorney General Maura Healey in 2020, who argued the two companies violated state labor and employment laws for years by defining drivers as independent contractors.
Uber Chief Legal Officer Tony West 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. 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,” West said in a statement.
The settlement upends what had already become an expensive ballot question fight that saw both companies push forward multiple versions of a question that classified drivers as independent contractors who would be entitled to some benefits.
Proposals backed by the industry-supported Flexibility and Benefits for Massachusetts Drivers campaign survived a legal challenge only hours before Campbell announced the settlement, with the Supreme Judicial Court ruling all five versions of the question were constitutionally sound.
If a ballot question does manage to pass in November without Uber and Lyft’s financial support, both companies agreed to abide by the terms of the settlement, according to prosecutors with Campbell’s office.
Lyft Executive Vice President of Driver Experience Jeremy Bird said the agreement is a “huge win for Massachusetts drivers” and “avoids the need for a ballot initiative campaign on this issue in November.”
“Rideshare is truly part of the economic and social fabric of the commonwealth. We’re thrilled to reach an agreement that works for everyone, and builds on similar progress we’ve made in states like New York, California, Minnesota, and Washington,” Bird said in a statement.
Arguments in the case began in mid-May, with lawyers for Uber and Lyft telling a local judge they were not transportation companies but rather technology businesses connecting people willing to drive to a person looking to get somewhere.
Prosecutors in Campbell’s office said Uber and Lyft were extracting enormous profits by classifying drivers as independent contractors, which denied them wage protections and traditional employee benefits.
Under the agreement, which lawyers were expected to file with the court Thursday, Uber and Lyft would boost wages to a minimum of $32.50 per hour starting Aug. 15 for time spent traveling to pick up riders and transporting them to their destination.
The hourly rate would be adjusted annually for inflation, ensuring for the “first time that the tens of thousands of Uber and Lyft drivers in Massachusetts will be guaranteed minimum pay,” Campbell’s office said in its statement.
Uber will pay $148 million and Lyft will shell out $27 million, a majority of which will be distributed as restitution to current and former drivers who were underpaid by the companies, according to Campbell’s office.
Drivers will also receive guaranteed paid sick leave, with the opportunity to earn one hour of sick pay for every 30 hours worked up to a maximum of 40 hours per year, according to a description of the agreement.
“As part of the agreement, Uber and Lyft must update their driver applications so drivers are able to view and claim their sick leave directly in the app,” Campbell’s office said.
Rideshare drivers can also receive a paid stipend to buy into the Massachusetts’ paid family and medical leave program and participate in a “pooled health insurance benefit,” according to the Attorney General’s Office.
“For the first time anywhere, Uber and Lyft will allow drivers to pool their hours driving for the two companies to obtain access to a health insurance stipend. Anyone who drives for more than 15 hours per week — for either or both companies — will be able to earn a health insurance stipend to pay for a plan on the Massachusetts Health Connector,” Campbell’s office said.
The agreement allows for drivers to be eligible for occupational accident insurance paid by the companies for up to $1 million in coverage for work-related injuries, Campbell’s office said.
Healey said the lawsuit against Uber and Lyft 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,” Healey said in a statement.