The ride-sharing companies Uber Technologies and Lyft Inc. have agreed to pay a total of $175 million to settle a class-action lawsuit alleging that both companies had misclassified their drivers as independent contractors, when in fact it was appropriate that they were classified as employees.
This erroneous categorization resulted in lower payments than those due according to state law in Massachusetts, and under those allegations the class action lawsuit was put together against the two technology giants. The state of Massachusetts was the one that filed the complaint, arguing that both Lyft and Uber had violated state labor laws by ignoring the right of their drivers to be hired as employees, who, according to the prosecution, should have received additional benefits and protections. Instead, they were classified as independent contractors, a designation that carries lower labor rights and compensation, and reduces the economic operating burden on the two companies.
Massachusetts Wins Lawsuit: Uber Lyft Pays $175 Million to Drivers
The agreement, according to the specialized website topclassactions.com , states that Uber will pay $148 million, while Lyft will contribute $27 million to compensate current and former drivers affected by this practice. In addition to monetary payments, the agreement includes several improvements in the working conditions of drivers, which entails recategorization.
Among the agreed improvements, the implementation of a guaranteed minimum wage of $32.50 per hour stands out. Drivers will also have access to paid sick leave, workplace accident insurance and health care stipends. These measures seek to significantly improve the employment situation of Uber and Lyft drivers in Massachusetts.
The Massachusetts Attorney General, Andrea Joy Campbell, expressed her satisfaction with the agreement, noting that it “holds Uber and Lyft accountable and provides their drivers, for the first time in Massachusetts, with a guaranteed minimum wage, paid sick leave, occupational accident insurance and health care stipends.”
More Profits and Better Conditions for Uber and Lyft Drivers
In addition to the aforementioned economic benefits, which are already a great victory for workers, the agreement requires Uber and Lyft to provide their drivers with clearer and more transparent information about trips before they are accepted. This information will include the duration of the trip, the final destination and the expected total earnings. This level of transparency aims to allow drivers to make more informed decisions about the trips they accept.
Another provision included in the agreement, in favor of drivers, is the prohibition of companies from discriminating or retaliating against drivers. It has also been established the obligation to make available to drivers an in-app chat with live support in several languages, including English, Spanish, Portuguese, and French.
This is not the first time a class action lawsuit against ride-hailing apps has come to these terms: in 2022, Uber had already reached a similar settlement in California, where it agreed to pay $8.44 million to resolve allegations of misclassifying its drivers as independent contractors.
Back in Massachusetts, with the signing of this class action settlement, a ballot measure backed by Uber and Lyft that proposed Massachusetts voters decide whether drivers of ride-sharing companies should continue to be classified as independent contractors is immediately discarded. Another union-backed ballot measure, which would allow drivers to unionize and bargain collectively, has not been affected by this agreement.