Uber and Lyft have agreed to pay New York drivers a $328 million settlement after the state attorney general investigated a wage-theft complaint charging that the companies collected certain taxes and fees from drivers rather than passengers.
Uber will pay $290 million and Lyft will provide $38 million into two funds that will pay out claims that roughly 100,000 current and former drivers in New York State are eligible to file. The ride-hailing companies did not admit fault in the settlement, which was made public on Thursday.
The investigation by the office of the attorney general, Letitia James, also looked into whether the companies failed to provide drivers with paid sick leave available to employees in the state.
“Ride-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 systematically cheated their drivers out of hundreds of millions of dollars in pay and benefits while they worked long hours in challenging conditions.”
Hours after the attorney general’s announcement, Gov. Kathy Hochul said that Uber would start making regular payments to the state’s unemployment insurance program as part of a settlement with New York’s labor department.
Labor experts on Thursday said that the settlements nudge drivers for ride-hailing companies closer to the rights and benefits owed to workers in more established industries, but many limitations remain.
Drivers in New York State and New York City are classified as independent contractors. The settlements announced on Thursday did not alter the designation, which is central to the debate over the treatment of gig workers.
“It’s not a full victory because there are so many other ways that they are still shirking their obligations to their workers,” said Laura Padin, who specializes in workplace standards at the National Employment Law Project.
The attorney general’s investigation began in 2020 after the New York Taxi Workers Alliance, a group representing the drivers, filed a complaint. The attorney general’s office focused on a 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 charge” from drivers’ payments in New York equal to the amount of sales tax and fees that should have been paid by riders, 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.
The companies responded by crediting Ms. James for working to improve drivers’ rights.
“We thank Attorney General James and her team for their hard work in delivering a resolution that balances accountability and innovation while addressing the true needs of these hard working drivers in New York,” Tony West, chief legal officer for Uber, said in a statement.
Jeremy Bird, Lyft’s chief policy officer, said in a statement, “This is a win for drivers, and one we are proud to have achieved with the New York attorney general’s office.” The Taxi Workers Alliance had filed a lawsuit on the issue in 2016. The lawsuit yielded a settlement for a small group of drivers.
“We’re thrilled,” said Bhairavi Desai, who has represented drivers since the 1990s as the head of the organization. “This was an eight-and-a-half-year pursuit for us.”
Under the settlement, drivers will earn 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 the apps.
Drivers outside the city will also be guaranteed minimum pay of $26 per hour, though that figure counts only the time between the dispatch and completion of a ride, as opposed to the time spent waiting to connect with a rider, which would be more lucrative. Drivers within the city already receive minimum driver pay under regulations established by the Taxi and Limousine Commission in 2019.
A representative for Uber said that any added costs would be passed on to riders, though the company did not provide details. A representative for Lyft did not reply to the question about the effect on fares.
As part of the separate settlement with New York’s labor department, Uber is also making retroactive payments dating back through 2013. The governor’s office declined to disclose the total amount of the settlement, citing confidentiality laws on unemployment insurance data.
Employers pay into the state’s unemployment insurance fund every three months. The state has argued that Uber drivers and delivery workers qualify as employees for the purposes of collecting unemployment benefits, which would obligate the company to make the quarterly payments.
Uber has countered that their drivers are independent contractors. Setting aside the question of employment status, state authorities and Uber have agreed to extend unemployment benefits to drivers with the company contributing to the fund.
Drivers for gig companies like Uber and Lyft are treated as independent contractors, meaning they are responsible for their own expenses and do not receive benefits like health care or a minimum wage under most states’ laws. This saves the companies on labor costs, and Uber and Lyft contend that drivers also prefer this system because it allows them flexibility to work whenever they want, rather than having set hours.
The contractor designation also means that companies do not have to pay workers overtime, nor do they have to pay the federal government taxes for social security benefits.
In recent years, labor advocates and some drivers have increasingly called out this model. They have fought for greater protections, prompting Uber to cut deals in some cities and states to give drivers limited benefits.
Drivers in New York City, Seattle and California all have minimum wage guarantees. Uber and Lyft successfully blocked minimum wage laws for gig workers in Minnesota, and driver advocates are pushing for reforms in Chicago as well.