Ride-share giants Uber Technologies Inc (NYSE:UBER, ETR:UT8) and Lyft Inc (NASDAQ:LYFT) have agreed to adopt a $32.50 hourly minimum wage for their drivers in Massachusetts and pay a $175 million penalty to settle a lawsuit brought on by the state’s attorney general which alleged the companies violated its wage and hour laws.
The agreement requires Uber to pay $148 million and Lyft to pay $27 million to the state, with at least $140 million to be paid to drivers, a court filing shows.
Uber and Lyft also agreed to give drivers paid sick leave, accident insurance, and healthcare stipends.
Further, they agreed to stop funding or supporting a 2024 ballot initiative that proposed to confirm app-based drivers’ status as contractors, who can legally be paid less.
“For years, these companies have underpaid their drivers and denied them basic benefits," Massachusetts Attorney General Andrea Campbell said in a statement.
“Today’s agreement holds Uber and Lyft accountable, and provides their drivers, for the very first time in Massachusetts, guaranteed minimum pay, paid sick leave, occupational accident insurance, and health care stipends.”
Tony West, Uber's chief legal officer, commented: "In taking this opportunity, we've resolved historical liabilities by constructing a new operating model that balances both flexibility and benefits.”
Shares of Uber traded up 3.1% at about $72 following the settlement news, while Lyft added 5.3% at about $14.