Uber and Lyft have agreed to pay New York drivers a $328 million settlement after the state attorney general investigated a wage theft lawsuit alleging that the companies collected certain taxes and fees from drivers and not from passengers.
Uber will pay $290 million and Lyft $38 million into two funds that will pay out claims that about 100,000 current and former drivers in New York state can file. The driving service providers did not admit any fault in the settlement.
The investigation by Attorney General Letitia James also examined whether the companies failed to provide drivers with paid sick leave, which is available to employees in the state.
“Rideshare drivers are working around the clock to get people where they need to go,” Ms. James said in a statement. “For years, Uber and Lyft have systematically defrauded their drivers of hundreds of millions of dollars in wages and benefits while they worked long hours in difficult conditions.”
The investigation began in 2020 after the New York Taxi Workers Alliance, a group representing drivers, filed a complaint. The attorney general’s office focused on a period from 2014 to 2017 in which Uber was accused of deducting sales taxes and fees from drivers’ payments even though they should have been paid by passengers.
From 2015 to 2017, Lyft similarly deducted an 11.4 percent “administrative fee” from New York drivers’ payments, equal to the amount of sales tax and fees that drivers should have paid, the attorney general’s office said . According to the attorney general’s office, Uber and Lyft also failed to provide drivers with paid sick leave, which employees are entitled to under New York City and New York State law.
The companies responded by recognizing Ms. James for her work to improve driver rights.
“We thank Attorney General James and her team for their hard work in crafting a solution that balances responsibility and innovation while addressing the real needs of these hard-working drivers in New York,” said Tony West, Uber’s Chief Legal Officer , in a statement.
Jeremy Bird, Lyft’s chief policy officer, said in a statement: “This is a victory for drivers, and we are proud to have achieved it together with the New York Attorney General’s Office.”
Under the agreement, drivers will receive one hour of sick pay for every 30 hours worked, up to 56 hours per year. Uber and Lyft will also update their apps to allow drivers to request sick leave through the apps.
Out-of-town drivers are also entitled to a guaranteed minimum wage of $26 per hour, although this amount only takes into account the time between providing and completing a ride, as opposed to the time spent contacting Waiting for a driver, which would be lucrative for longer. Drivers within the city already receive a minimum driver wage under regulations set by the Taxi and Limousine Commission in 2019. An Uber representative said any additional costs would be passed on to riders, but the company did not immediately say how much. A Lyft representative did not immediately respond when asked what impact the changes would have on fares.
Drivers for gig companies like Uber and Lyft are treated as independent contractors rather than employees under most states’ laws, meaning they are responsible for their own expenses and do not receive benefits such as health care or a minimum wage. This saves companies money, and Uber and Lyft claim that drivers also prefer this system because it gives them the flexibility to work whenever they want rather than having set work hours.
In recent years, labor advocates and some drivers have increasingly criticized this model, arguing that Uber and other companies exploit drivers by exerting control over how they work while denying them the benefits that should accompany that oversight. They have fought for more protections, prompting Uber to reach deals in some cities and states to give drivers limited benefits while barring them from being classified as employees.
Drivers in New York State and New York City are considered independent contractors. But Thursday’s settlement agreement between the state and ride-hailing companies made no changes to how drivers are classified as employees under state law, which is central to the debate over the treatment of gig workers.
Drivers in New York City, Seattle and California all have minimum wage guarantees. Uber and Lyft have successfully blocked minimum wage laws for gig workers in Minnesota, and driver advocates are also pushing for reforms in Chicago.
Check back for updates on this developing story.