Uber and Lyft Agree to Raise Driver Pay in Massachusetts

Ride-sharing companies Uber (UBER) and Lyft (LYFT) have been pushed to pay drivers more in states across the country, with the latest pay increases coming Thursday in Massachusetts.

Uber and Lyft drivers in the state secured a guaranteed wage floor and other benefits, while maintaining their status as independent contractors, in a deal between the companies and the state attorney general.

The companies will be required to pay their gig-economy drivers $32.50 per active trip hour and provide benefits including paid sick leave. 

Deal Settles 2020 State Lawsuit

The agreement settles a 2020 lawsuit filed by the state of Massachusetts arguing that gig-economy drivers should be classified as employees, which would entitle them to additional benefits and protections under state law. Uber and Lyft also agreed to pay Massachusetts a combined $175 million to settle allegations of state wage law violations. 

While the independent contractor label remains in place for drivers, Attorney General Andrea Joy Campbell’s office noted that the deal prevents Uber and Lyft from trying to “rewrite state employment” with a 2024 ballot initiative, which the companies proposed in response to the suit. 

Uber and Lyft Have Also Faced Government Action in California, Minnesota

Uber and Lyft have backed ballot initiatives across the country that lock in their drivers as independent contractors, including in California, where Proposition 22 in 2020 enshrined that status while providing some benefits. That law would go on to be invalidated in court in 2021 and then reinstated in 2023. The case currently sits with the California Supreme Court.

In Minneapolis, Uber and Lyft threatened to shut down service after the city council passed a minimum wage for drivers in March, alleging high operating costs. The companies ultimately reached a deal to stay that included a more modest pay increase than the council proposed in a state law passed in May.

In both the Massachusetts and Minnesota cases, the pay guarantee is calculated over a two-week period, rather than per ride, which Uber said will keep costs lower for riders.