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Uber and Lyft have reached a historic agreement with prosecutors in Massachusetts, under which its drivers will be guaranteed a minimum hourly pay rate for the first time.
The new deal guarantees drivers a minimum pay of $32.50 per hour, among the highest rates for ride-sharing workers in the US.
The companies have also agreed to a $175million settlement with the state, which will compensate current and former drivers who were previously underpaid.
Alongside the minimum hourly pay rate, workers will also be guaranteed further benefits including paid sick leave, occupational accident insurance, and healthcare stipends.
The minimum wage only applies to periods where drivers are transporting customers or travelling to pick them up, and not to periods where drivers have not accepted a ride request.
Abby Taylor, deputy attorney general for Massachusetts, said the $32.50 rate is designed to account for this downtime.
An appeals process has also been implemented, allowing drivers to push back when they feel their accounts have been unfairly deactivated.
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Andrea Campbell, the state’s attorney general, said of the agreement reached on Thursday: “For years, these companies have underpaid their drivers and denied them basic benefits… Today’s agreement holds Uber and Lyft accountable.”
The settlement comes after four years of litigation, with Massachusetts joining Minnesota, New York, and Washington as one of four states to offer a minimum wage to drivers at companies like Uber and Lyft.
Historic victory for Uber & Lyft drivers in Massachusetts
Under the new agreement, drivers who work over 15 hours per week will be entitled to sick leave and can accrue up to 40 hours of paid sick leave per year.
The leave can be bought via stipends, which allows the drivers to buy into Massachusetts’ state program for paid family and medical leave. They are also given a stipend for health benefits.
Jeremy Bird, Lyft’s EVP of Driver Experience, told the Guardian the moment was a “huge win for Massachusetts drivers,” adding it “secures their freedom to earn when, where and however long they want”.
According to Byrd, Lyft’s flexible working platform relies on an average of 8,500 drivers per day in Massachusetts.
Tony West, Uber’s Chief Legal Officer has shared a blog post about the agreement, describing it as “an example of what independent, flexible work with dignity should look like in the 21st century.”
He said the agreement has “resolved historical liabilities” and “balances both flexibility and benefits.”
The ongoing employee classification battle
The deal was settled just days before Uber and Lyft were due to pull operations from Minneapolis. The ride-sharing companies announced earlier in the year their plans to cease operations after the city council passed legislation that guaranteed a minimum pay rate for drivers.
The pay rise was planned for May 1, but the council pushed the raise back to July 1, prompting Uber and Lyft to delay their planned exit.
Minneapolis will now be the US city where Uber and Lyft do not operate.
However, both companies do not plan to pull out of Massachusetts following the new agreement, which will come into effect on August 15.
The agreement has been hailed by some drivers as a major advancement in their earnings and protections under employment law, but many are still seeking a firm ruling on their employment status—something which this agreement did not cover.
The state has previously accused Uber and Lyft of misclassifying workers as independent contractors, rather than employees, claiming the companies do so to avoid offering benefit contributions.
Bills have been introduced by prosecutors in the Massachusetts General Court of Commonwealth designed to clamp down on Uber and Lyft’s classification. Uber and Lyft argue that their workers do not want to be classified as employees, and prefer the independence afforded by their current classification.
Maura Healey, former attorney general and now governor, who launched the suit in 2020, has previously described Uber and Lyft as having “gotten a free ride for far too long.”
She hailed the new minimum rate as “historic,” stating her belief that the settlement will “right the wrongs of the past.”
