Uber and Lyft drivers will receive a minimum wage of $32.50 per hour and benefits in Massachusetts

Uber and Lyft drivers will now get a minimum wage of $32.50 an hour and several other benefits under a settlement between the companies and Massachusetts Attorney General Andrea Campbell. The two companies also agreed Thursday to pay $175 million to settle a lawsuit filed by the attorney general that accused the companies of improperly treating drivers as independent contractors to provide lower compensation and fewer benefits.

Years-long litigation brings relief to drivers

The settlement resolves a 2020 lawsuit filed by the state of Massachusetts that sought to have gig economy drivers classified as employees. The suit argued that gig economy workers should be entitled to additional benefits and protections provided under state law. The suit opposed attempts by Uber and Lyft to lock drivers in as independent contractors.

Now that the settlement has been reached, Uber and Lyft have agreed to stop funding or supporting a ballot initiative that would have asked voters in November to block app-based drivers’ status as contractors, Attorney General Andrea Campell said, according to a CNN report.

Uber and Lyft have issued separate statements about the deal. “By seizing this opportunity, we have resolved historic liabilities by building a new operating model that balances flexibility and profit,” Uber’s chief legal officer, Tony West, wrote in a statement.

In addition to the benefits, Uber will pay $148 million and Lyft $27 million to the state of Massachusetts. Additionally, about $140 million will be paid to drivers, CNN reported citing a court filing.

A set of benefits for drivers

In addition to the hourly wage increase, drivers will now receive one hour of sick day pay (up to 40 hours per year) for every 30 hours of work. Uber and Lyft will also update their apps for drivers to allow them to view and claim their sick leave directly from the app’s dashboard. Drivers will also receive a health care stipend to become members of the state’s paid family and medical leave program.

Drivers will be entitled to workers’ compensation insurance coverage of up to $1 million for work-related injuries, paid for by the companies.

The agreement also requires companies to provide key information such as trip duration, destination and expected earnings before accepting the trip. Other information such as the reason for the driver’s deactivation will also be provided. Drivers will be able to create an appeal process in the event of deactivation and will receive in-app chat support in English, Spanish, Portuguese and French.

The battle of Uber and Lyft

This is not the first time Uber and Lyft have faced government action. The two companies have pushed ballot initiatives across the country to focus on their drivers’ status as independent contractors.

In California, companies have been successful in enshrining the status while also providing some benefits to drivers. However, the law was later invalidated and reinstated in 2023. The case is currently in the California Supreme Court, according to Investopedia.

While in Minneapolis, both Uber and Lyft threatened to shut down their services after the city council approved a minimum wage for all drivers. The companies reached a similar agreement and agreed to pay a modest wage increase.