Uber and Lyft agree to pay $328 million in compensation to New York drivers

Uber and Lyft have agreed to pay a $328 million settlement to drivers in New York after the state attorney general investigated a wage theft complaint accusing the companies of collecting certain taxes and fees from drivers instead of passengers.

Uber will pay $290 million and Lyft will provide $38 million in two funds that will pay claims that about 100,000 current and former drivers in New York state are eligible to file. The passenger transport companies did not admit fault in the settlement announced on Thursday.

The investigation by Attorney General Letitia James’ office also looked into whether the companies failed to provide drivers with paid sick leave available to employees in the state.

“Share drivers work at all hours of the day and night to take people wherever they need to go,” Ms James said in a statement. “For years, Uber and Lyft have systematically defrauded their drivers out of hundreds of millions of dollars in wages and benefits while they worked long hours in difficult conditions.”

Hours after Attorney General’s announcementGovernor Kathy Hochul He said Uber would start making regular payments to the state’s unemployment insurance program as part of a settlement with the New York Department of Labor.

The settlements push ride-hailing drivers closer to the rights and benefits owed to workers in more established industries, but many limitations remain, labor experts said Thursday.

Drivers in New York State and New York City are classified as independent contractors. The settlements announced Thursday did not change the classification, which is central to the debate over the treatment of gig workers.

“It’s not a complete victory because there are so many other ways they can still evade their obligations to their workers,” said Laura Padden, a workplace standards specialist at the National Employment Law Project.

The attorney general’s 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 the period from 2014 to 2017 during which Uber was accused of deducting sales taxes and fees from drivers’ payments when 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 riders should have paid, the attorney general’s office said. Uber and Lyft also failed to provide drivers with paid sick leave available to employees under New York City and New York State law, according to the Attorney General’s Office.

Companies responded by crediting Ms. James for her work to improve drivers’ rights.

“We thank Attorney General James and her team for their hard work in delivering a solution that balances accountability and innovation while meeting the real needs of these hard-working drivers in New York,” Tony West, Uber’s chief legal officer, said in a statement. .

“This is a win for drivers, and one we are proud to achieve with the New York Attorney General’s Office,” Lyft chief policy officer Jeremy Byrd said in a statement. The Taxi Workers Alliance filed a lawsuit over the issue in 2016. The lawsuit resulted in a settlement for a small group of drivers.

“We are very happy,” said Bhairavi Desai, who has represented drivers since the 1990s as president of the organization. “This has been a chase for us for eight and a half years.”

Under the settlement, drivers will receive one hour of sick pay for every 30 hours worked, up to 56 hours per year. Uber and Lyft will also allow drivers to request sick leave through apps.

Out-of-town drivers would also be guaranteed a minimum wage of $26 per hour, although that number only counts the time between sending a ride and completing it, rather than time spent waiting to connect with a passenger, which would be more lucrative. Inner-city drivers already earn a minimum driver wage under regulations established by the Taxi and Limousine Commission in 2019.

An Uber representative said any additional costs would be passed on to passengers, though the company did not provide details. A Lyft representative did not respond to the question about the impact on pricing.

As part of the separate settlement with the New York Department of Labor, Uber is also making retroactive payments dating back to 2013. The governor’s office declined to disclose the total amount of the settlement, citing confidentiality laws related to unemployment insurance data.

Employers pay into the state unemployment insurance fund every three months. The state has argued that Uber drivers and delivery workers qualify as employees for purposes of collecting unemployment benefits, which would require the company to make quarterly payments.

Uber responded that its drivers are independent contractors. Regardless of the issue of employment status, state authorities and Uber have agreed to extend unemployment benefits to drivers with the company contributing to the fund.

Drivers working for gig companies like Uber and Lyft are, under most states’ laws, treated as independent contractors, meaning they are responsible for their own expenses and do not receive benefits like health care or the minimum wage. This saves companies on labor costs, and Uber and Lyft confirm that drivers also prefer this system because it allows them the flexibility to work whenever they want, rather than set working hours.

Hiring the contractor also means companies don’t have to pay overtime wages to workers, nor do they have to pay federal taxes for Social Security benefits, said Ms. Padden, the workplace standards expert.

In recent years, labor rights advocates and some drivers have increasingly criticized this model. They have fought for greater protections, leading Uber to cut deals in some cities and states to give drivers limited benefits.

All drivers in New York City, Seattle, and California enjoy minimum wage guarantees. Uber and Lyft have successfully blocked minimum wage laws for gig workers in Minnesota, and driver advocates are pushing for reforms in Chicago as well.