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Uber and Lyft are to pay $328 million to settle New York wage theft claims

A sign marks a rendezvous location for Lyft and Uber users at San Diego State University in San Diego, California, U.S., May 13, 2020. REUTERS/Mike Blake/File Photo
A sign marks a rendezvous location for Lyft and Uber users at San Diego State University in San Diego, California, U.S., May 13, 2020. REUTERS/Mike Blake/File Photo

Uber (UBER.N) and Lyft (LYFT.O) have agreed to pay $328 million to resolve the attorney general’s allegations that they routinely defrauded drivers of their wages and perks. To conclude her office’s multi-year investigation into the firms, Attorney General Letitia James said that Uber would pay $290 million and Lyft would pay $38 million. She referred to this as the most significant wage theft settlement in her office’s history.

In addition, drivers will be entitled to paid sick leave and minimum hourly rates. Notices and in-app chat help to answer inquiries regarding pay and other working conditions will also be provided to them.

James’ investigation focused on allegations that Lyft and Uber unfairly collected certain taxes and fees from drivers in New York rather than from customers. The settlements will benefit over 100,000 drivers in the state, both active and retired.

“This is huge,” said attorney Shannon Liss-Riordan, who is defending hundreds of Uber and Lyft drivers who are unhappy with the businesses’ business methods. “This settlement could help advance other states’ efforts to reach a recovery for drivers whose rights have been violated.”

James’ investigation of Lyft’s and Uber’s designation of drivers as independent contractors rather than employees, which both businesses frequently defend in court, when interacting with lawmakers, and during elections, has also been concluded by the settlement.

San Francisco-based Uber and Lyft denied any misconduct and referred to their agreements as a “win” for drivers. Following the settlements, Uber’s and Lyft’s shares increased by 6.3% and 9.2%, respectively.

The chief legal officer of Uber, Tony West, stated that the company’s settlement “helps put to rest” the categorization problem and will serve as a template for other states.

In a different statement, Lyft thought it had always correctly categorized drivers as independent contractors.

CLASSIFICATIONS OF DRIVERS

Long-standing accusations that Uber and Lyft deprive its drivers—many of whom are immigrants—of compensation and benefits—including by refusing to recognize them as employees—have been refuted by the companies’ national defense teams.

Numerous drivers for both businesses have preferred working as independent contractors. The payments comprise under 1% of Uber and Lyft’s yearly income.

James said that although passengers should have been responsible for paying such sums, Uber and Lyft had wrongfully withheld sales taxes and fees for a worker’s compensation fund from drivers’ earnings. Uber’s alleged infractions happened from November 2014 to May 2017, and Lyft’s from October 2015 to July 2017.

According to James, both businesses also refused drivers the sick leave to which state and New York City employees are legally entitled. Drivers “finally get what they have rightfully earned and are owed under the law,” according to James’ statement, thanks to Thursday’s settlements.

Uber and the New York State Department of Labor reached a separate deal in which Uber committed to send quarterly payments to a state insurance fund to guarantee compensation to jobless drivers. Uber did not make the sum of its costs public.

The New York Taxi Workers Alliance, representing 21,000 yellow taxi, green cab, app-based, liveried, and corporate car drivers, had concerns that led to James’ investigation.

Drivers outside of New York City will be paid at least $26 per hour under the settlements for trips and sick leave, with the amount being adjusted for inflation every year.

As mandated by the city’s Taxi and Limousine Commission, drivers in New York City already earn a minimum wage and some paid time off. According to James, sick leave pay for drivers for Uber and Lyft will be $17 per hour, adjusted for inflation.

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