Uber and Lyft Agree to Pay $328 Million to Settle Wage-Theft Claims in New York

In a groundbreaking development, rideshare giants Uber and Lyft have reached an agreement to disburse a combined $328 million to New York drivers as part of a settlement resolving wage-theft complaints. This significant settlement stems from an investigation led by New York State Attorney General Letitia James, examining whether these tech-driven transportation companies had been improperly collecting fees and taxes from drivers instead of passengers.

The investigation also delved into allegations that the companies had failed to provide paid sick leave to their drivers. This landmark resolution has far-reaching implications for drivers in terms of recovering alleged stolen wages and securing essential employment rights.

Notably, the settlement formalizes a statewide right to minimum wage for drivers and guarantees paid sick benefits, marking a pivotal shift in how rideshare drivers are recognized. Andrew Wolf, an assistant professor at Cornell University’s School of Industrial & Labor Relations, observed that this settlement signifies that these drivers are indeed employees who deserve the same employment rights as any other worker. He also highlighted that it underscores how gig companies have historically shifted employment risks onto drivers.

Uber will contribute a substantial $290 million, while Lyft will provide $38 million. These funds will be used to pay claims to around 100,000 current and former drivers in New York State who are eligible to file. Notably, neither Uber nor Lyft has admitted to any wrongdoing. Jeremy Bird, Lyft’s chief policy officer, expressed pride in the settlement, emphasizing that it's a significant victory for drivers.

Both companies expressed their intent to continue working towards offering New York drivers the independence and comprehensive benefits available to drivers in other states. This development also signifies the resolution of the classification issue in New York and moves forward with a model aligned with the evolving nature of work.

In addition to the settlement with the Attorney General's office, Uber has committed to making regular payments to New York's unemployment insurance program as part of a separate agreement with the state's labor department. New York has emerged as a pivotal battleground for securing labor rights for gig workers, with these settlements marking significant progress. However, labor activists contend that there is more work to be done, as drivers in the state are still classified as independent contractors.

Future Benefits of the Wage-Theft Settlement

The settlement achieved with the Attorney General's office introduces several key benefits for drivers. Drivers will now be entitled to one hour of sick pay for every 30 hours worked, up to 56 hours per year. Uber and Lyft are mandated to allow drivers to request sick leave through their apps, with Uber drivers set to start accruing sick leave from February 29, 2024.

Drivers operating outside New York City will receive a minimum of $26 per hour, but only while they are en route to pick up a passenger or when a passenger is present in the vehicle. However, labor activists have contended that time spent searching for ride requests should also be considered as paid working hours.

It's important to note that drivers within New York City already receive a minimum driver pay as established by regulations put forth by the Taxi and Limousine Commission in 2019. Uber has indicated that these additional costs will be passed on to passengers.

The investigation into wage theft, initiated based on claims by the New York Taxi Workers Alliance, focused on a period from 2014 to 2017. During this time, Uber had deducted sales taxes and fees from driver payments, which were meant to be covered by passengers.

Lyft, on the other hand, is accused of deducting an 11.4% "administrative charge" from drivers' payments in New York, equivalent to the amount of sales tax and fees that should have been paid by passengers. Both companies are further accused of failing to provide drivers with paid sick leave, as mandated by New York City and New York State law.

Uber to Pay Employment Insurance Contributions

In addition to the employment insurance contributions, Uber's settlement with the New York Department of Labor will also entail retroactive payments dating back to 2013, although the total amount of this settlement remains undisclosed.

This settlement reflects the state's stance that Uber drivers and delivery workers qualify as employees for unemployment benefit purposes. As a result, Uber will be required, like other New York employers, to make quarterly payments into the state's Unemployment Insurance Trust Fund, making New York the first state with which Uber has agreed to settle both past and future unemployment insurance liability.