Uber and Lyft, the San Francisco-based giants of the for-hire ride hailing business, have agreed to a $328 million settlement with the state of New York in connection with allegations that the companies stole drivers’ earnings, New York attorney general Letitia James announced Thursday.
The two companies also agreed to provide sick leave, along with minimum base pay starting at $26 an hour to their drivers across the state.
The payout is the result of a three-year investigation by the Office of the Attorney General into allegations that the two companies deducted taxes and fees from drivers’ paychecks that state law says should have been paid by riders.
Uber will pay $290 million and Lyft will pay $38 million into two separate settlement funds to be paid directly to drivers in what is the largest settlement of its kind, according to James’ office.
The agreement allows the companies to continue to recognize drivers as independent contractors and not employees.
More than 100,000 drivers across the state who worked for Lyft from 2015 to 2017 and Uber from 2014 to 2017 are eligible for restitution as part of the agreement and can begin to submit their claims as soon as Thursday. (UberEats delivery workers do not qualify for relief under the settlement.)
The attorney general’s office began its investigation in 2020 after persistent advocacy from the Taxi Workers Alliance, the union representing cabbies and some for-hire ride hail drivers. The union first brought their allegations to the attorney general’s office in 2015 and sued Uber over pay deductions the following year, with some drivers who signed out of arbitration winning settlements. The union sued both Uber and Lyft in 2019 over the practice and again took their case to the attorney general’s office.
Taxi Workers Alliance president Bhairavi Desai said in a phone interview Thursday morning that she and her members are “ecstatic,” adding: “It pays to be persistent. Our members never gave up.”
“You can’t turn back the clock and feed a hungry belly, but this money is going to help drivers get the life that they should have had in the years that this money was initially stolen,” she added. “I hope that drivers will be able to move into that bigger apartment, put a down payment on their next car, or have their kid go back to college – that’s how significant this is.”
“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 on Thursday. “This settlement will ensure they finally get what they have rightfully earned and are owed under the law.”
Representatives for both companies said they were satisfied with the agreement.
“This is a win for drivers, and one we are proud to have achieved with the New York Attorney General’s Office,” Lyft executive Jeremy Bird said in a statement. “We look forward to continuing this work in order to provide New York drivers the independence and full range of benefits available to those in other states, like California and Washington.” The company denies any wrongdoing.
“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,” Uber chief legal officer Tony West said in a statement. “We remain eager to work with policymakers, drivers, advocates and other stakeholders around the world to forge similar frameworks that unlock true flexibility plus benefits and protections for platform workers.”
At the heart of the settlement are allegations that the two companies improperly deducted what amounts to hundreds of millions of dollars from drivers’ earnings to pay taxes that, under state law, should have been paid by passengers.
From 2014 to 2017, according to the attorney general’s office, Uber deducted sales tax and state workers compensation fees that should have been paid by passengers, and misrepresented the deductions in its terms of service.
In practice, the company was allegedly taking its cut out of each ride from a figure that included state taxes, rather than the pre-tax fare.
Similarly, Lyft deducted an 11.4% “administrative charge” from drivers’ payments in New York from 2015 to 2017 – an amount equal to the sales tax and workers comp fees, known as the Black Car Fund, that should have been paid by riders.
In that same period, neither company provided drivers with paid sick leave under New York city and state law, according to James’ office.
In 2017, Uber admitted it miscalculated the commissions it charged its drivers. An analysis by the New York Times estimated the company bilked drivers by hundreds of millions of dollars. “We are committed to paying every driver every penny they are owed — plus interest — as quickly as possible,” then-Uber executive Rachel Holt said at the time.
Statewide hourly minimum pay rate standards agreed to as part of the settlement mark the first time New York drivers outside of the five boroughs will receive a guaranteed minimum pay.
The wage standards are guaranteed and the paid sick leave benefits accrue when a driver accepts a trip with either app, at a rate of one sick day for every 30 hours of trips, for up to a total of 56 hours of paid sick leave per year.
Minimum pay will be adjusted to inflation annually and allows drivers to use more than one app. Drivers in New York City will continue to be paid under the standards first set by the Taxi and Limousine Commission in 2019.
The two companies also agreed to make updates to the apps that include notifying drivers after each ride of the amount paid by the passenger, and to provide in-app chat support for drivers in English, Spanish, Chinese, Russian, French and Bengali.
In addition, drivers will now be able to appeal all account deactivations.