(Bloomberg) — Uber Technologies Inc. and Lyft Inc. agreed to a series of worker benefits to resolve a longstanding state lawsuit in Massachusetts that challenged drivers’ employment status as independent contractors.
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The companies also will pay a combined $175 million to the state to settle allegations they violated Massachusetts wage and hour laws, state Attorney General Andrea Campbell said Thursday in a statement.
Uber and Lyft will put in place a minimum wage standard for active driving time, offer paid sick leave and pay a cash stipend for health insurance, among other changes, Campbell said in the statement.
“We’ve resolved historical liabilities by constructing a new operating model that balances both flexibility and benefits,” Uber Chief Legal Officer Tony West said in a separate statement.
Campbell’s lawsuit against Uber and ride-hailing peer Lyft had been at trial with closing statements expected Friday. The agreement announced Thursday ends the case.
The settlement is a win for companies like Uber and Lyft. They have sought for years to reach deals with unions and lawmakers in the US that would provide drivers with new benefits, while ensuring the firms can still classify them as independent contractors. That designation excludes workers from traditional employment rights such as an hourly minimum wage and the ability to unionize.
The companies are eager to temper classification issues as they seek to curb overhead costs to sustain their business model. Uber had hoped to model agreements in Massachusetts and other states on a similar deal it struck with the New York attorney general last year, which also keeps drivers classified as contractors.
As a result of the settlement, Uber and Lyft intend to withdraw their support of an industry-backed referendum on the 2024 state ballot that asks voters to cement gig workers’ status as independent contractors.
Under the Massachusetts agreement, Uber and Lyft will pay drivers a minimum of $32.50 per hour spent on the way to pick up a passenger and during a ride. That excludes the waiting time between each ride. The companies also will also provide chat support for drivers in multiple languages including Spanish, French and Portuguese.
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