The NY state attorney general’s office has secured two “landmark settlements” totaling $328 million to resolve a multiyear investigation into rideshare companies Uber and Lyft that found they had cheated thousands of drivers out of hundreds of millions of dollars and prevented them from receiving benefits they were entitled to under New York labor laws.
The details of the settlements were released early Thursday and indicate the $328 million will be used to provide back pay and also to create a minimum “earnings floor” for drivers, as well as provide them with sick pay, earnings notices and better working conditions and hiring practices.
The settlements call for Uber and Lyft to pay $290 million and $38 million, respectively, into separate funds which will be distributed to current and former drivers. The attorney general’s office said that eligible drivers will receive notifications through mail, email and/or text messages on how to file a claim.
“Rideshare drivers work at all hours of the day and night to take people wherever they need to go,” state Attorney General Letitia James said in a statement. “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 noted that drivers “overwhelmingly come from immigrant communities and rely on these jobs to provide for their families.”
The investigation was prompted by a complaint filed in 2015 with the governor’s office and the state attorney general’s office by the New York Taxi Workers Alliance. The yearslong investigation confirmed the alliance’s allegations that from 2014 to 2017, Uber deducted sales taxes and “Black Car Fund” fees (which provide for workers’ compensation) from drivers’ payments when those taxes and fees should have been paid by passengers, according to the attorney general’s office.
The Taxi Workers Alliance, which also sued the rideshare companies over their practices, said the surcharges amounted to thousands of dollars per year for many drivers who were being fleeced in shares they received from fares. The alliance alleged Lyft also “took out two deductions from every fare, that were exactly the same amount of the tax and (Black Car Fund) surcharge…. Unlike Uber, though, Lyft misrepresented what these deductions were for.”
The Black Car Fund is a non-profit organization created by the state that provides benefits such as workers compensation and health benefits to more than 100,000 drivers, including luxury limousine drivers.
The alliance, in a posting on its website, said that following news reports about the improper deductions being made by Uber and Lyft, the latter changed its payment practices, and then altered driver records, to make it look like Lyft had never taken separate deductions of 8.8 and 2.5 percent from drivers’ pay. Those “administrative charges” should have been paid by riders.
Lyft, in a statement Thursday morning, denied wrongdoing.
“We believe that Lyft has always properly classified drivers as independent contractors and that the fees it charged drivers in 2015-2017 complied with applicable laws,” the statement reads. “It’s also important to note that the concerns the New York attorney general’s office had with respect to Black Car Fund and sales tax pertain only to the 2015-2017 time period. Lyft changed its practices in 2017, and our current ones were not at issue in this matter.”
Freddi Goldstein, a spokeswoman for Uber, also said the company denies any wrongdoing.
“The pay standard is specifically for time the driver has accepted a trip and is en route to a passenger and with a passenger in the car,” Goldstein said. “The (attorney general) understood that the only way to maintain flexibility (which she heard from drivers was critical) was to ensure the open platform model remained and in order to do that, pay must be limited to time spent working, not just having the app on in the background.”
The attorney general’s office said that Uber misrepresented the deductions made to drivers’ pay in their terms of service, telling drivers that they were entitled to charge passengers for any tolls, taxes or fees, although no method to do that was available on the Uber Driver app.
The settlement also stipulates that the companies agreed to an “earnings floor” that will guarantee drivers are paid a minimum rate from dispatch to completion of a ride. Drivers outside of New York City will receive a minimum of $26 per hour, adjusted annually for inflation, to guarantee for the first time they receive a minimum pay. Drivers in New York City already receive that minimum pay under Taxi & Limousine Commission regulations put in place in 2019.
Uber and Lyft drivers will also earn one hour of sick pay for every 30 hours worked, up to a maximum of 56 hours per year. Drivers will be able to request sick leave through the apps and, in New York City, they will be compensated at $17 per hour when they are on sick leave.
The new requirements for hiring notices include accurately explaining the earnings for drivers and income statements that detail the compensation for each pay period. The companies will also notify drivers after each ride of the amount that was paid by a rider.
Other portions of the settlement include in-app chat support for drivers in multiple languages and the ability for drivers to appeal deactivations from the rideshare platforms.
The attorney general’s office estimates that more than 100,000 drivers throughout New York will be eligible to receive settlement funds and the new benefits outlined in the agreements.
“This settlement will ensure they finally get what they have rightfully earned and are owed under the law,” James said. “My office will continue to make sure that companies operating in the so-called ‘gig economy’ do not deprive workers of their rights or undermine the laws meant to protect them.”