Ride-hail giants settle, avoiding Massachusetts ballot fight
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Uber and Lyft drivers in Massachusetts will earn a minimum of $32.50 an hour and receive employment benefits under a settlement with the state.
Why it matters: This is the first major settlement between gig economy companies and state regulators.
- It will eliminate the need for a ballot question to determine if drivers should be considered employees
- And it could set a nationwide precedent and inform other states looking to settle the independent contractor question in their own jurisdictions.
Driving the news: Ride-hailing giants Uber and Lyft reached a $175 million settlement with the Commonwealth of Massachusetts Thursday to end both a yearslong court battle and an expected ballot fight over classifying drivers.
- The settlement came a day after the state's top court cleared the way for a ballot battle in November.
- The gig economy giants have already spent around $45 million on the effort to keep drivers classified as independent contractors in Massachusetts.
By the numbers: The $32.50 an hour rate will apply when drivers are transporting a rider or en route to a pickup.
- Drivers will remain classified as independent contractors, but will now receive health insurance stipends, paid sick time and accident insurance.
- Uber will pay $148 million of the $175 million settlement with Lyft picking up the rest.
- The payment is to settle the state's accusations that the companies have been violating state labor laws.
What they're saying: "For years, these companies have underpaid their drivers and denied them basic benefits," Attorney General Andrea Campbell said in a statement.
- Campbell had been asking the courts to force the companies to treat drivers as employees subject to the state's labor laws.
The ride-hail companies also see the settlement as a win because they will not be forced to take drivers on as employees.
- The companies, and many drivers, have insisted that the business model relies on the flexibility of independent contractors.
- "This allows both Uber and Massachusetts to move forward in a way that reflects what drivers want and demonstrates to other states what's possible to achieve," an Uber spokesperson said in a statement.
What's next: Uber said ride prices might increase slightly under the settlement, but that the company hasn't seen higher wages disturb consumers in other areas with higher pay.