New York City – Rideshare giants Uber and Lyft have agreed to pay a combined $328 million to settle a lawsuit brought by the New York Attorney General alleging the companies misclassified drivers as independent contractors and denied them proper pay and benefits.
The settlement marks the largest recovery in a wage theft case in the New York Attorney General’s history and aims to provide long-overdue compensation and protections for over 100,000 Uber and Lyft drivers in New York.
Attorney General Letitia James announced the massive settlement deal on Friday, November 3rd, 2023. According to the terms, Uber will pay $290 million and Lyft will pay $38 million to the drivers impacted by the alleged violations.
Drivers Set to Receive Minimum Pay Guarantees and Paid Sick Leave
A key component of the settlement requires both companies to institute minimum pay standards for drivers moving forward. Drivers outside of New York City will now be guaranteed a minimum of $26 per hour for rides, adjusted annually for inflation.
Within New York City, where minimum pay regulations already exist, Uber and Lyft will guarantee drivers at least $17 per hour in paid sick leave. This critical benefit will allow drivers paid time off for illness, preventive care, and safe leaves of absence.
James emphasized that the pay and benefit protections are essential steps in the right direction. “This settlement will ensure drivers finally get what they have rightfully earned and are owed under the law,” she stated.
Millions in Restitution for Past Violations
In addition to the minimum pay guarantees, Uber and Lyft have agreed to pay substantial restitution to compensate drivers for past alleged violations.
The Attorney General’s investigation found that between 2014-2017, Uber unlawfully deducted sales tax and a Black Car Fund surcharge from driver pay. Lyft was found to have made the same improper deductions between 2015-2017.
Uber and Lyft also allegedly failed to provide sick leave to drivers as required under New York City’s Paid Safe and Sick Leave law.
To remedy these past violations, Uber and Lyft will distribute settlement funds to impacted drivers. With over 100,000 current and former drivers set to receive payments, the settlement will put millions of dollars back into the pockets of workers denied their full compensation.
Settlement Follows Years-Long Misclassification Investigation
The landmark settlement comes after a years-long investigation into Uber and Lyft’s classification of drivers as independent contractors. Attorney General James initiated the probe in response to concerns raised by the New York Taxi Workers Alliance.
The Attorney General’s office found substantial evidence that Uber and Lyft’s business models exerted considerable control over drivers.
By misclassifying employees as independent contractors, Uber and Lyft avoided paying payroll taxes, unemployment insurance, minimum wage, overtime pay, and other critical benefits and protections.
“Uber and Lyft drivers are employees under New York law and entitled to all associated protections,” said James. The settlement aims to enforce those rights for drivers across the state.
Impact on Nationwide Gig Economy Debate
The massive settlement has far-reaching implications in the ongoing debate over gig worker rights and protections.
By taking a strong stance against misclassification, New York’s actions could inspire other states and cities to follow suit. Seattle, Washington D.C., Massachusetts, and Illinois have already implemented measures to protect gig workers against exploitation.
However, resistance remains strong among app-based companies striving to keep labor costs down. Uber and Lyft spent over $200 million on a 2020 California ballot initiative that ultimately allowed them to continue classifying drivers as contractors.
While the victory in New York marks progress for gig workers, the fight for fair labor practices remains an uphill battle nationwide. The settlement will provide compensation long-denied to thousands of drivers in New York, but there is still substantial work ahead in the push for economic justice.
Response from Uber and Lyft
In response to the deal, an Uber spokesperson emphasized the company’s commitment to improving conditions for drivers:
“We’re committed to strengthening rights and protections for drivers as independent contractors with improved earning opportunities, benefits, and protections,” they stated.
Lyft expressed a similar sentiment in their statement:
“We are committed to improving the driver experience and making Lyft the first choice for drivers for years to come. We’re eager to continue collaborating with policymakers, labor partners and drivers to craft policies that expand access to flexible work while upholding important standards.”
While noncommittal on driver classification, the statements suggest potential openings for continued dialogue on better protections for gig workers.
Attorney General James made clear she will keep pushing for further progress:
“I will continue to fight on the front lines alongside gig workers to ensure companies obey the law and workers are protected,” she affirmed.
For now, the historic settlement provides some measure of financial justice and security for Uber and Lyft drivers in New York. But the ongoing dispute over their status and rights remains unresolved on a national scale.
