Uber, Lyft agree on minimum wage for Massachusetts drivers to settle lawsuit By Reuters

By Nate Raymond and Daniel Wiessner

BOSTON (Reuters) – Uber Technologies and Lyft (NASDAQ:) agreed Thursday to adopt a $32.50 minimum hourly wage standard for Massachusetts drivers and pay $175 million to settle a lawsuit filed by the state’s attorney general alleging that they had inappropriately treated drivers as independent contractors who can legally receive lower pay than employees.

The companies also agreed to provide drivers with paid sick leave, accident insurance and health care benefits and to stop funding or supporting a ballot initiative that would have asked voters in November to cement the status of app-based drivers as contractors, Attorney General Andrea Joy Campbell said.

Uber (NYSE:) and Lyft said in separate statements that the deal reflects the desire of most drivers to work on their own terms while still enjoying many key benefits legally guaranteed to employees.

“By seizing this opportunity, we have solved our historical problems by building a new operating model that balances both flexibility and benefits,” said Tony West, Uber’s general counsel.

The agreement requires Uber to pay $148 million and Lyft to pay $27 million to the state. At least $140 million will be paid to drivers, according to a court filing.

Campbell, a Democrat, made the announcement hours after Massachusetts’ highest court allowed voters to decide whether to approve the industry-backed ballot measure, as well as a dueling proposal backed by unions to allow drivers to unionize, which will continue to move forward. .

It was also the eve of closing arguments in a nonjury trial in a 2020 lawsuit brought by Campbell’s predecessor, current Gov. Maura Healey, over the status of drivers whose services helped fuel America’s gig economy.

Campbell had asked a 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.

Studies have shown that using contractors can cost businesses up to 30% less than employees.

“For years, these companies have underpaid their drivers and denied them basic benefits,” Campbell said in a statement. “Today’s agreement holds Uber and Lyft accountable.”

The agreement provides greater benefits and pay for Uber and Lyft drivers than those provided by a similar agreement reached in November with New York state and a law signed in May in Minnesota.

In their defense at trial, Uber and Lyft argued that Campbell’s office misunderstood their business models and that they could be forced to reduce or end their services in Massachusetts if their drivers were deemed to be employees.

Along with DoorDash (NASDAQ:) and Instacart (NASDAQ:), they had financially supported flexibility and benefits for Massachusetts drivers, the ballot measure committee behind the proposal to ask voters to consider drivers based on applications like entrepreneurs.

Uber, Lyft agree on minimum wage for Massachusetts drivers to settle lawsuit By Reuters

The proposal also planned to offer drivers benefits similar to those in the regulation. After the announcement, Conor Yunits, a spokesperson for the industry-backed campaign, said the group would no longer pursue the initiative.

The industry, through a $200 million campaign, had already convinced California voters in 2020 to adopt a measure similar to the one supported by the Massachusetts companies, thus consolidating drivers as independent contractors with certain benefits. Litigation challenging that measure is ongoing.

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