Uber, Lyft Agree To $328 Million In Back Pay For N.Y. Drivers

(Bloomberg) — Ride-hailing companies Uber Technologies Inc. and Lyft Inc. agreed to pay New York drivers a total of $328 million in back pay and carry out a series of labor reforms to resolve state investigations into their employment practices.

The companies will start to offer paid sick leave, put in place a minimum “earnings floor” and vowed to improve hiring and earnings notices, among other changes, New York Attorney General Letitia James said Thursday in a statement. Under separate settlement agreements to resolve probes into improper tax charges on drivers, Uber will pay $290 million and Lyft will pay $38 million to current and former New York drivers, James said.

The agreements will prevent further litigation over whether drivers should be classified as employees with traditional legal protections as long as the company adheres to the terms of the deal, Uber spokeswoman Freddi Goldstein said.

Uber also struck a separate agreement with the state’s Department of Labor to offer drivers and couriers unemployment benefits. The company “will begin making quarterly payments into the New York State Unemployment Insurance Trust Fund and make a retroactive payment to the UI Trust Fund for payments owed since 2013” on behalf of drivers, according to a statement from Governor Kathy Hochul’s office.

Uber and Lyft have sought for years to reach agreements with unions and lawmakers in the US that would provide drivers with new perks while ensuring the companies can still classify them as independent contractors excluded from some traditional legal protections such as hourly minimum wage and collective bargaining.

Efforts to pass such compromises via legislation have failed in states including New York — where some labor advocates argued drivers should instead get full-fledged employee rights — but succeeded last year in Washington State. In California, after gig companies including Uber and Lyft failed to secure a deal with unions and legislators, they bankrolled a successful $200 million referendum on the 2020 ballot.

“This helps put to rest the classification issue in New York and moves us forward with a model that reflects the way people are increasingly choosing to work,” said Uber Chief Legal Officer Tony West. Jeremy Bird, Lyft’s chief policy officer, also sees this as a win for drivers, saying in a statement on the company’s blog that the agreement expands upon the state’s foundation of “providing drivers portable benefits through flexible earning opportunities.”

Uber sees the New York deal as a model that should be spread to other jurisdictions because it improves drivers’ benefits while leaving in place the flexibility of the independent contractor model, and keeps drivers’ compensation tied to the time when they’ve assigned a passenger, and not the time they spend waiting in between passengers, according to an Uber official who requested anonymity to speak candidly.

After trying to reach such an agreement through legislation and compromises with labor groups, the company is glad to have secured one with the attorney general, and hopes it helps spur similar agreements elsewhere, the person said.

Bhairavi Desai, executive director at the New York Taxi Workers Alliance, whose members include Uber and Lyft drivers and had brought this case to the attorney general, said the workers had achieved a “phenomenal” settlement.

“This is going to be life-changing and undo the sacrifices the drivers had to make all those years ago when their wages were stolen,” she said. Desai said her group will continue advocating for drivers to be considered employees with unionization rights under federal law, but that the settlement represents a step forward in securing them more of the rights that employees elsewhere receive.

“The reality is while Uber’s been fighting to hold onto semantics, we’ve been winning rights back for drivers,” she said.

Improper Tax Charges

James, the New York attorney general, said in her statement that Uber improperly deducted sales tax and other fees from driver paychecks from 2014 to 2017 that should have been paid by passengers. According to the attorney general’s statement, Uber falsely told drivers that it would only deduct its commission from fares, and that drivers were permitted to charge passengers for any tolls, taxes or fees that were incurred during a ride.

In reality, James said, “no method to do this was ever provided via the Uber Driver app.”

The attorney general said Lyft employed a “similar method to shortchange drivers” from 2015 to 2017 by deducting an 11.4% “administrative charge” from drivers’ payments in New York that were equal to the sales tax and other fees that should have been paid by riders.

“For years, Uber and Lyft systemically cheated their drivers out of hundreds of millions of dollars in pay and benefits while they worked long hours in challenging conditions,” James said in a statement. “These drivers overwhelmingly come from immigrant communities and rely on these jobs to provide for their families.”

Under the agreements, Uber and Lyft will tell drivers after each ride how much was paid by the customer. They’ll also provide chat support for drivers in multiple languages “so they can easily ask questions about their earnings or other work conditions,” according to the statement.

The Uber accord also allows drivers to appeal decisions by the company to deactivate a driver’s access to the app.