Uber and Lyft agree to minimum pay and benefits for Massachusetts drivers

<span>“For years, these companies have underpaid their drivers and denied them basic benefits,” said Massachusetts attorney general Andrea Campbell.</span><span>Photograph: Lucy Nicholson/Reuters</span>
“For years, these companies have underpaid their drivers and denied them basic benefits,” said Massachusetts attorney general Andrea Campbell.Photograph: Lucy Nicholson/Reuters

Uber and Lyft drivers will be guaranteed among the highest wages in the US for ride-share workers under a historic deal agreed with Massachusetts prosecutors.

Andrea Campbell, the state’s attorney general, and the two companies agreed to a $175m settlement Thursday evening that requires a minimum pay floor of $32.50 per hour, and introduces a slew of other benefits and protections that drivers didn’t already have.

The resolution to four years of litigation between the parties also resulted in a settlement of $174m to be paid by the companies: $148m from Uber and $27m from Lyft. Most will be distributed as restitution to current and former drivers who were underpaid by the companies. More information about who will qualify for those payments and how to file a claim will be released in the coming weeks.

“For years, these companies have underpaid their drivers and denied them basic benefits,” said Campbell. “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 healthcare stipends.”

Massachusetts now joins New York, Minnesota, Washington, and other states in setting a minimum pay rate for drivers.

Related: Minneapolis drivers protested wages – and won. Lyft and Uber are choosing to leave the city rather than pay up

Drivers will also benefit from access to paid sick leave if they work 15 hours weekly, as well as a stipend for health benefits and occupational accident insurance. They can accrue up to 40 hours annually of paid sick leave, which will be bought through stipends to buy into the state’s program for paid family and medical leave.

Both Uber and Lyft don’t intend to pull out of Massachusetts and operations will continue. The changes will go into effect on 15 August and will be adjusted annually for inflation.

Ed Booth has been driving for Lyft for over seven years. He said he usually makes a lot more than the new floor for wages, but it depends on what hours he works and whether there’s a surge of customers – like at 2am when youth leave closing bars.

“Then all of a sudden, you’ll get all this cash windfall that will bring your average back up to somewhere around $40, $45,” he said.

He described himself as an independent guy who has owned many businesses, including a current one in web development. “I’ve been treating this like my own business,” he said, adding that he doesn’t want any union involvement in the future.

“You know, the health insurance, I’m gonna take advantage of it,” he said. He’s “a little bit” concerned that many new drivers will sign up to take advantage of the hourly floor, creating more competition, but he’s confident enough to handle it.

Jeremy Bird, Lyft executive vice president of driver experience, called the moment a “huge win for Massachusetts drivers that secures their freedom to earn when, where and however long they want”. He said on any given day, the flexible work on the Lyft platform provides an average of 8,500 drivers in Massachusetts independence to earn while attending school and caring for families.

Uber media relations referred the Guardian to a blogpost where Tony West, Uber chief legal officer, wrote that the agreement is “an example of what independent, flexible work with dignity should look like in the 21st century”.

“In taking this opportunity, we’ve resolved historical liabilities by constructing a new operating model that balances both flexibility and benefits,” West said.

The accord doesn’t take a stance on the classification of drivers, allowing them to continue to act as contractors.

That’s the one thing that made the settlement a mixed bag for Henry De Groot, co-founder of the organization Massachusetts Drivers United. He often works 30 hours between Friday to Sunday as a driver.

“On the one hand, a massive victory for drivers. That delivers real advancements in terms of an earnings guarantee in terms of paid sick leave, health care and other important basic protections of employment law,” he said. But he’s disappointed because Campbell’s office didn’t “pursue enforcement of the law here. There’s no ruling on employment status.”

Related: Uber and Lyft made a deal to raise drivers’ wages. It was another victory for big tech | Edward Ongweso Jr

Drivers will be paid the minimum of $32.50, and will be able to make more – the wage will apply for when drivers are en route to pick up passengers or transporting them. Some drivers complained that the companies won’t be required to pay for the time when they’ve logged onto their apps, but haven’t chosen a customer’s ride request.

“By setting the amount at $32.50, we were trying to account for the time the driver’s are waiting as well,” said Abby Taylor, Massachusetts deputy attorney general, who worked on the case.

For health insurance, drivers will be offered a “pooled health insurance benefit” for anyone who drives more than 15 hours per week, boiling down to an insurance stipend to pay for a plan through the state’s health connector.

The agreement also allows an appeals process for drivers to push back on deactivations.

Then attorney general, Maura Healey, who is now governor, launched the lawsuit in 2020, alleging the ride share companies were boosting their profits by treating drivers as contractors and denying them benefits that employees would receive.

“Our lawsuit against Uber and Lyft was always about fairness for drivers,” she said Thursday night in a statement, calling the wages “historic” and a benefit to “right the wrongs of the past”.

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