In a substantial lawsuit settlement that could have ripple effects throughout the gig economy, Uber and Lyft have agreed to pay their drivers in Massachusetts a $32.50 hourly minimum wage and grant them benefits.
Reuters reports that the two rideshare giants will also provide $175 million to settle a lawsuit brought by the state’s Attorney General Andrea Joy Campbell.
Initially filed in 2020 by then-Attorney General Maura Healey, the lawsuit had argued that these companies improperly categorized their drivers as independent contractors rather than employees to circumvent state labor laws — and that this cost the state substantial sums in unpaid taxes and insurance.
This classification also allowed the companies to avoid providing standard employee benefits such as minimum wage, overtime pay, and sick leave. This was also addressed in the agreement.
It’s reported that under the new settlement drivers will receive benefits including paid sick leave, accident insurance, and healthcare stipends.
The settlement of the lawsuit marks a pivotal moment in the ongoing debate over the classification and compensation of gig economy workers.
In addition to the financial settlement, Uber and Lyft have agreed to withdraw their support for a ballot initiative designed to solidify the classification of app-based drivers as independent contractors.
Advocates see this agreement as a significant win for gig workers in Massachusetts, providing them with more benefits and higher pay than similar agreements in Minnesota and in New York.
However, Uber and Lyft maintained during the trial that classifying drivers as employees might force them to cut or end services in the state. Despite these concerns, the settlement is seen as a big step in redefining worker rights within the gig economy.
As debates continue to take shape nationwide, the large settlement may serve as a model for other states grappling with similar issues.
