Uber and Lyft (NASDAQ:LYFT) have reached a landmark wage theft settlement of a combined $328 million following a multi-year investigation by New York Attorney General Letitia James. This investigation, which revealed systematic underpayment of drivers and denial of benefits, has resulted in the largest wage theft settlement in the history of the Attorney General's office. Uber will contribute approximately $290 million and Lyft about $38 million to the settlement fund. This follows a settlement between Uber Technologies Inc . (NYSE:UBER) and the New York State Department of Labor, revealed by Governor Kathy Hochul.
The probe uncovered that between November 2014 and May 2017, Uber had improperly deducted sales taxes and Black Car Fund fees intended for workers' compensation and insurance coverage from drivers' earnings. Similarly, Lyft made similar deductions from October 2015 to July 2017, resulting in a $38 million liability. Both companies misrepresented their terms of service and lacked a method for charging these fees to passengers as per their terms of service on their respective driver apps. The companies were also accused of denying drivers, who are primarily immigrants serving as primary breadwinners, their legal sick leave entitlements.
More than 100,000 current and former drivers will benefit from the settlement and can file a claim to receive these funds. The deadline for filing claims is set at February 29, 2024. As part of the agreement reached, both Uber and Lyft are mandated to improve working conditions by setting a minimum driver earnings floor from dispatch to ride completion, providing guaranteed paid sick leave as per current regulations, proper hiring notices with detailed benefits information, and accurate earnings statements after each ride.
For drivers outside New York City, an inflation-adjusted minimum wage of $26 per hour is now guaranteed as per the city's Taxi and Limousine Commission's mandate. In New York City, drivers will receive $17 per hour for sick leave. Drivers can accrue one hour of sick pay every 30 hours worked, up to 56 hours annually, with the ability to request sick leave in-app.
Moreover, both companies have agreed to make significant changes to their business practices. These include guaranteeing minimum hourly rates, paid sick leave, and in-app support for driver queries in multiple languages. They will also provide compensation breakdowns, including details of rider payments for each ride, an in-app chat tool for discussing earnings and work conditions, and a deactivation appeal process. Companies will offer loan forgiveness for cab drivers who owned medallions and were exploited by predatory lenders. Uber will also make retroactive payments into the New York State Unemployment Insurance (UI) Trust Fund for payments owed since 2013.
The allegations against Uber and Lyft were initially brought forward by the New York Taxi Workers Alliance (NYTWA). Affected drivers will be notified via mail, email or text about claim procedures. New York state attorney general Letitia James highlighted that this settlement will ensure drivers, largely from immigrant communities and working under challenging conditions, receive their rightful earnings and better living conditions. NYTWA member Malang Gassama claimed he lost at least $25,000 due to these deductions. Another member of the NYTWA and Uber driver, Ishtiaq Ahmed, revealed that Uber was making drivers pay for sales tax and another customer surcharge instead of customers. Westchester County Executive George Latimer, State Senator Pete Harckham, and Assemblymember Chris Burdick praised the settlement, emphasizing its significance for hardworking rideshare drivers who were cheated out of their rightful earnings. Bhairavi Desai, executive director of NYTWA, described the settlement as a "historic victory". The settlement fund is projected to be fully funded by November 2025.
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