Nate Raymond and Daniel Wiessner
BOSTON (Reuters) – Uber Technologies and Elevator (NASDAQ:) on Thursday agreed to adopt a $32.50 minimum hourly wage standard for Massachusetts drivers and pay $175 million to settle a lawsuit by the state’s attorney general alleging it mistreated drivers as independent contractors who by law may receive less compensation than employees.
The companies also agreed to provide drivers with paid sick leave, accident insurance and medical stipends, and to stop funding or supporting a ballot initiative that would have asked voters in November to designate app-based drivers as contractors, Attorney General Andrea Joy Campbell said. . .
Uber (NYSE:) and Lyft said in separate statements that the agreement reflects the desire of most drivers to work on their own terms while receiving many of the key benefits that are legally guaranteed to employees.
“We are taking this opportunity to resolve historical liabilities by building a new operating model that combines flexibility and value,” said Tony West, Uber’s general counsel.
The agreement calls for Uber to pay the government $148 million and Lyft to pay $27 million. According to the court decision, drivers will be paid at least $140 million.
Campbell, a Democrat, made the announcement hours after the Massachusetts Supreme Court cleared the way for voters to decide whether to approve an industry-backed ballot measure and an opposing union-backed proposal to allow drivers to unionize, which would keep moving forward. .
It was also on the eve of closing arguments in a non-jury trial in a lawsuit filed in 2020 by Campbell’s predecessor, now Gov. Maura Healey, over the status of drivers whose services have helped fuel the U.S. economy.
Campbell asked the judge to find that the state’s 55,000 Uber drivers and 35,000 Lyft drivers are employees under state law and therefore entitled to benefits such as minimum wage, overtime and earned sick leave.
Research has shown that using contractors can cost companies 30% less than using employees.
“For years, these companies have underpaid their drivers and denied them basic benefits,” Campbell said in a statement. “Today’s agreement places responsibility on Uber and Lyft.”
The settlement provides better benefits and pay for Uber and Lyft drivers than under a similar settlement in November with New York state and under legislation passed in May in Minnesota.
Uber and Lyft, defending themselves in court, argued that Campbell’s office misunderstood their business models and that they could be forced to reduce or end service in Massachusetts if their drivers were considered employees.
They, along with DoorDash (NASDAQ:) and Instacart (NASDAQ:) have provided financial support to Massachusetts Driver Flexibility and Benefits, the ballot committee behind a proposal to ask voters to count app-based drivers as contractors.
The proposal also included providing drivers with benefits similar to those provided in the settlement agreement. Following the announcement, Conor Units, a spokesman for the industry-backed campaign, said the group would no longer promote the initiative.
Earlier in 2020, the industry, through a $200 million campaign, persuaded California voters to pass a measure similar to one the companies backed in Massachusetts, reinforcing drivers as independent contractors with some benefits. Legal proceedings challenging this measure are ongoing.