Written by Daniel Wiessner and Nate Raymond
- Reuters, BostonUber Technologies, and Lyft (NASDAQ: LYFT) settled on Thursday, agreeing to pay $175 million to settle a lawsuit brought by the state attorney general, who claimed that the companies had improperly treated drivers as independent contractors, entitled to lower pay than employees, and to adopt a $32.50 hourly minimum pay standard for drivers in Massachusetts.
- Attorney General Andrea Joy Campbell stated that the businesses also consented to provide paid sick leave, accident insurance, and healthcare stipends to drivers, as well as to cease backing or endorsing a ballot measure that would have asked voters in November to confirm the status of app-based drivers as contractors.
- Uber’s chief legal officer, Tony West, said, “By seizing this opportunity, we’ve resolved historical liabilities by building a new operating model that balances both flexibility and benefits.”
- According to the accord, Lyft must pay the state $27 million and Uber $148 million. Drivers will get at least $140 million in compensation, according to a court document.
- Hours after the highest court in Massachusetts opened the path for voters to determine whether to support the industry-backed ballot initiative and the competing labor-backed plan to let drivers form unions, which will proceed, Democrat Campbell made the announcement.
- Additionally, it was the eve of the concluding arguments in a non-jury trial concerning the legal standing of drivers whose services have fueled the gig worker economy in the United States, which was brought in 2020 by Campbell’s predecessor, current governor Maura Healey.
- Campbell has been requesting a court to rule that the 35,000 Lyft drivers and the 55,000 Uber drivers in the state are considered workers for state law, meaning they are eligible for benefits like earned sick leave, overtime pay, and minimum wage.
- According to studies, using contractors may save businesses up to 30% compared to hiring workers.
- In a statement, Campbell said, “These companies have underpaid their drivers and denied them basic benefits for years.” “Today’s agreement holds Uber and Lyft accountable.”
- Uber and Lyft drivers will get more perks and compensation from the settlement than from a comparable agreement reached in November with the state of New York and from legislation enacted in May in Minnesota.
- In their trial defense, Uber and Lyft said that the Campbell office misinterpreted their business strategies and that, should their drivers be considered workers, they could be obliged to suspend or terminate operations in Massachusetts.
- They had contributed financially to the ballot measure committee behind the plan to seek voters to classify drivers who use apps as contractors, together with DoorDash (NASDAQ: DASH) and Instacart (NASDAQ: CART).
- In addition, the plan proposed for offering drivers benefits similar to those in the settlement. Conor Yunits, a spokesman for the industry-backed campaign, said after its statement that the organization would no longer be pursuing the endeavor.
- Through a $200 million campaign, the industry had already persuaded Californian voters to approve a bill like to the one supported by the Massachusetts firms in 2020, so establishing drivers as independent contractors with certain perks. There is still litigation against the legislation.
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