((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(New overall, added rule) by Nate Raymond and Daniel Wiessner
Uber Technologies UBER.N and Lyft LYFT.O will pay $175 million and implement a $32.50 hourly minimum wage for Massachusetts drivers to settle a state lawsuit accusing them of improperly treating drivers as independent contractors who can legally receive less pay than employees, the state attorney general said Thursday.
The companies also agreed to give drivers paid sick leave, accident insurance and health care benefits, and to stop funding or supporting a state ballot initiative that would solidify drivers’ entrepreneurial status based on the app, Democratic Attorney General Andrea Joy Campbell said in a statement.
In separate statements, Uber and Lyft said the deal reflects the desire of most drivers to work on their own terms while enjoying many key benefits that are legally guaranteed to employees.
“By seizing this opportunity, we have addressed historic liabilities by building a new operating model that balances both flexibility and benefits,” said Tony West, Uber’s chief legal officer.
The agreement calls for Uber to pay $148 million and Lyft $27 million to the state. At least $140 million will be paid to drivers, according to a court filing.
Mr. Campbell made the announcement hours after the state’s highest court cleared the way for voters to decide in November whether to approve the industry-backed ballot measure, along with another proposal aimed at allowing drivers to unionize.
It was also the day before closing arguments in a nonjury trial in Boston over the status of drivers whose services helped fuel the U.S. gig worker economy.
Mr. Campbell asked a judge to find that the state’s 55,000 Uber drivers and 35,000 Lyft drivers are employees under state law and therefore entitled to benefits such as minimum wage, overtime and sick leave.
Studies have shown that using contractors can cost businesses up to 30% less than employees.
In a statement, Mr. Campbell said the deal held Uber and Lyft liable for underpaying drivers for years. The companies have denied wrongdoing in the lawsuit.
Earlier Thursday, the Massachusetts Supreme Judicial Court rejected a challenge to the union-backed ballot measure, on which Uber and Lyft spent millions of dollars. The proposal would guarantee drivers most of the benefits included in the state’s settlement with Uber and Lyft.
Through a $200 million campaign in 2020, the industry convinced California voters to pass a measure similar to one the companies supported in Massachusetts, which makes drivers independent contractors with certain benefits. Litigation challenging that measure is ongoing.
