Uber and Lyft will pay Massachusetts drivers some of the highest guaranteed wages in the country under a landmark agreement with state attorneys general that also halted a years-long campaign to rewrite how state law defines those workers.
Attorney General Andrea Campbell and the companies agreed to a $175 million settlement Thursday evening that ended A lawsuit that is nearly four years old Against Uber and Lyft, it sets a slew of new wage, benefits and job protection requirements, and avoids the legal question at the heart of the case.
The deal guarantees significant pay increases for tens of thousands of drivers and ensures they will soon have access to paid sick leave, occupational accident insurance and some degree of health benefits — which plaintiffs allege the companies have unfairly failed to provide for years.
Uber and Lyft will no longer face the possibility of a judge declaring status quo arrangements with drivers illegal in Massachusetts, and they can continue to define their drivers as independent contractors.
The companies plan to continue offering rides in Massachusetts and said they don’t expect any significant impact on operations. An Uber official said rider fares could rise slightly, but added that the company has minimized disruption in other states like New York, where popular apps are being asked to start paying drivers higher fares.
“For years, these companies have underpaid their drivers and deprived them of basic benefits,” Campbell said in a statement. “Today’s agreement holds Uber and Lyft accountable and provides their drivers, for the first time in Massachusetts, with a guaranteed minimum wage, paid sick leave, and insurance.” against occupational accidents, and health care bonuses.”
The deal has changed the political landscape this summer and fall, prompting major economic powers to suspend their campaign for a referendum question that would have defined drivers as independent contractors rather than employees.
In the settlement, Uber and Lyft agreed to “cease participating in any funding or support” of the ballot question.
Instacart and DoorDash were also part of a coalition working to change driver status in state law and could have tried to continue the fight on their own. However, a campaign spokesperson confirmed Thursday evening that supporters no longer plan to submit a question to the Nov. 5 ballot.
It was a stunning reversal for the industry-backed campaign, which had already spent about $45 million on efforts to get voters to change the state law in their favor. On Thursday morning, the state Supreme Court issued its final ruling. The measure has been approved to appear on the ballotAfter nine and a half hours, the procedure was officially cancelled.
Under the settlement, Uber and Lyft must pay their drivers at least $32.50 per hour when workers are either on their way to pick up passengers or actively transporting passengers to a location. The companies are not required to pay for the time drivers are logged into the app but do not have a passenger in their car or are not traveling to pick someone up. Those wages are due to begin Aug. 15 and will be adjusted annually for inflation.
The rate is much higher than in some other states. In New York, drivers outside New York City earn at least $26 per hour for the time between accepting a trip and completing it (the same amount of time as is compensated in Massachusetts).
Drivers here will also begin accruing up to 40 hours of paid sick leave per year, at a rate of $20 per hour, and Uber and Lyft have agreed to take out occupational accident insurance for drivers.
The companies will also offer “mobile health funds,” cash stipends that drivers can use to pay for eligible health insurance plans, starting next year. Uber calls it “the nation’s first mobile health insurance benefit fund.” They’ll also provide drivers with stipends to participate in the state’s paid family and medical leave program.
Other parts of the agreement call for Uber and Lyft to give drivers more information about trips and expected earnings before accepting a trip, support in-app chat in multiple languages, and an appeals process to challenge 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 restitution. Campbell’s office said it will announce details on who is eligible for the payments and how to apply in the coming weeks.
Labor leaders celebrated the agreement. In a statement issued by Campbell’s office, Chrissy Lynch, president of the American Federation of Labor in Massachusetts, announced: “The free rides offered by Uber and Lyft have ended.”
“This settlement includes a comprehensive package of strong wages, benefits and protections for drivers who have been exploited by these companies for years,” Lynch said. “We greatly appreciate the hard work of AG Campbell in holding these companies legally accountable to Massachusetts employment laws.”
The two parties submitted the settlement agreement before five o’clock Thursday evening, the eve of the closing arguments in the trial. Its filing immediately ends the court proceedings, preventing Judge Peter Krupp from issuing a decision that could have declared Uber and Lyft in violation of or in compliance with existing labor law.
The settlement takes no position on how drivers should be classified, effectively allowing companies to continue treating drivers as contractors but with new pay and benefits requirements.
“This agreement is an example of what flexible, dignified independent work should look like in the 21st century,” Tony West, Uber’s chief legal officer, said in a statement. “We’re excited to see more policymakers support mobile benefits and innovative frameworks to improve independent work.” Blog post“In seizing this opportunity, we resolved historical liabilities by building a new operating model that balances flexibility and benefits. This allows both Uber and Massachusetts to move forward in a way that reflects what drivers want and shows other states what can be achieved.”
Jeremy Bird, Lyft’s executive vice president of driver experience, called the settlement “a huge win for Massachusetts drivers that ensures their freedom to work when, where and however they want.”
Massachusetts has become the latest state to reach a legal or legislative settlement with Uber and Lyft, which for years have spent heavily on lobbying and political campaigns in an attempt to reshape state laws in their favor.
In 2022, Uber New Jersey paid $100 million in back taxes After officials there alleged the company had incorrectly classified its drivers as independent contractors, late last year the two companies accused Collectively, they paid $328 million In a New York wage theft settlement that also required Uber and Lyft to provide drivers with paid sick leave and new minimum wage standards, Minnesota announced in May that it would resume health care work in the state. He issued a new law This would require Uber and Lyft to increase what they pay drivers and introduce new protections, a compromise after Minneapolis sought to impose larger price increases on the companies.
Former Attorney General Maura Healey, who is now the state’s governor, sued Uber and Lyft in 2020, alleging that they had inflated their profits for years by treating drivers as 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 agreement “provides historic wages and benefits to right the wrongs of the past and ensure drivers receive fair wages in the future.”
The case languished behind the scenes for nearly four years before the trial began before a judge last month.
Stakeholders in the debate over app-based driver wages and benefits have been unable for years to push reform measures through the Legislature, or amend the state’s independent contractor law, forcing parties to try to reconcile differences in court or through ballot questions.
Senate President Karen Spilka praised Campbell’s team for its “perseverance” in negotiating the settlement, and said she was “glad to see millions of dollars will be paid to former drivers who were denied these basic benefits for years.”
“For too long, transnational drivers have been denied access to policies that were enacted to protect our working residents,” Spilka said. “I am pleased to see that the Attorney General’s tireless efforts have led to this historic settlement to extend these protections to Uber and Lyft drivers.”
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