• As part of a settlement, Uber and Lyft will need to pay drivers in Massachusetts a guaranteed wage of $32.50.
• In addition, drivers will be able to earn sick pay hours and additional healthcare benefits.
• The firms may still refer to their drivers as “independent contractors”.

Anytime we ask Uber about whether it considers its the drivers who use the service employees, the ride-hailing firm pushes the concept of “independent contractors”. This term protects Uber from having to pay wages, assign leave and all the other complexities hiring employees presents.

The company has pushed this line for a long time but a crack has now appeared in the US state of Massachusetts. As part of a settlement deal with Attorney General Andrea Campbell, Uber and Lyft will pay a combined $175 million to resolve allegations that the company violated wage and hour laws in the state as reported by ABC News.

In addition, drivers will reportedly earn one hour of sick day pay for every 30 days worked. The maximum time that can be earned is 40 hours per year. Drivers will also be able to access occupational accident insurance. Perhaps most importantly though is that Uber must pay drivers at least $32.50 per hour while they are travelling to a pickup or taking a passenger to a destination. This rate must also be adjusted for inflation annually.

However, despite these benefits, Uber and Lyft can continue to define their drivers as independent contractors.

“For years, these companies have underpaid their drivers and denied them basic benefits,” the Attorney General 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,” Campbell added.

Uber, Lyft, Instacart, DoorDash and others have campaigned to keep drivers designated as “independent contractors” rather than employees. Despite many of these platforms relying on drivers so much that without them, the apps would be dead, the operators still maintain that the drivers aren’t important enough to be defined as employees.

This makes apps such as Uber more affordable to run because instead of having to hire drivers, one can just open the app up to anybody and some folks will be tempted at the prospect of being their own boss.

Whether this deal in Massachusetts will rock the boat is unclear but we have a feeling that it might. While Uber and its ilk can say this is an exception to its rule, eventually the pressure to give other drivers similar benefits may prove too much for the company.

This pressure could be dialled up given that Uber turned a profit in 2023 for the first time since going public. Granted, the company turned a profit before going public as well but it’s been a long slog to become profitable.