HOURS AFTER the state’s highest court green-lit a series of ballot initiatives defining the rights of app-based drivers to go before voters in November, Attorney General Andrea Campbell announced a sweeping legal settlement between the state and the tech giants Uber and Lyft that could derail the ballot fight.
The $175 million settlement throws a monkey wrench into what was set to be a fierce and expensive ballot campaign season, as Uber, Lyft, DoorDash, and Instacart sought to classify their drivers as independent contractors rather than employees under state law.
Filed Thursday evening, the settlement resolves a suit first brought in 2020 under Gov. Maura Healey when she was attorney general. The lawsuit argued that Uber and Lyft (DoorDash and Instacart were not sued) were deliberately ignoring the state’s strict test for when a worker is considered an independent contractor and therefore depriving their roughly 90,000 drivers of basic benefits and protections.
The settlement, according to the attorney general’s office, “puts a stop to the threat of the companies’ attempting to rewrite state employment law via a 2024 ballot initiative.” Though the agreement only binds Uber and Lyft – who agree not to support or fund the ongoing ballot campaign that would classify their drivers as independent contractors – the expectation is without those two companies’ deep pockets, the coalition is likely to pull the measure.
According to the attorney general’s office, along with an agreement from Uber to pay $148 million and Lyft to pay $27 million to the state, the companies agreed to a minimum pay standard of $32.50 per hour – far more than the $18 an hour the companies were offering in their ballot questions – and benefits and protections for drivers.
Additionally, the settlement requires drivers to receive one hour of sick pay for every 30 hours worked, up to a maximum of 40 hours per year; a paid stipend to buy into the state’s paid family and medical leave program; a novel health insurance benefit for those driving over 15 hours a week for Uber or Lyft (drivers can even pool hours they work for the two companies); and occupational accident insurance paid by the companies for up to $1 million in coverage for work-related injuries.
A single judge, Peter Krupp, oversaw the classification trial beginning in mid-May and had it set for closing arguments on Friday. But the last two scheduled hearings were canceled, and the final settlement agreement puts a button on the case.
“For years, these companies have underpaid their drivers and denied them basic benefits. 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 said in a statement.
Massachusetts now joins a handful of other states who have resolved labor classification enforcement lawsuits through settlements that lay out mandatory benefits for drivers and restore what attorneys general say are effectively stolen wages. As in other states, the ride-share companies are not agreeing to any liability under Massachusetts law.
A New York enforcement action, arguing wage theft through Uber and Lyft driver misclassification, resulted in a $328 million settlement earlier this year. The settlement also includes a specific set of benefits promised by Uber and Lyft to their drivers, terms which approximate some of the benefits the tech companies are pledging to their drivers under Massachusetts ballot measures.
In California, the San Diego district attorney’s office settled a similar suit with Instacart for $46.5 million in 2022.
State Auditor Diana DiZoglio’s office determined in a recent report – contested by the ride-share companies – that if drivers should always have been treated as employees the state was deprived of about $266 million in combined workers’ compensation, unemployment insurance, and paid family and medical leave payments over the past decade.
Campbell said most of the settlement money will be distributed as restitution to current and former drivers who were underpaid by the companies.
Massachusetts has the strictest law in the country defining employee versus independent contractor status. California, in fact, modeled its classification law after Massachusetts’ so-called “ABC Test.”
This settlement leaves the current law intact, and neither defines app-based drivers as employees or independent contractors. It sets a hard floor for Uber and Lyft when it comes to essential benefits and pay, but the companies could be hit with additional obligations if the Legislature or voters act in the future, according to the attorney general’s office.
DoorDash and Instacart were not included in the initial suit brought by Healey. Both companies boomed during the pandemic, which spiked demand for at-home delivery options.
Earlier Thursday, the Supreme Judicial Court gave the go-ahead to an array of ride-share-focused ballot questions, one of which would allow app-based drivers to unionize and collectively bargain, and five proposed versions of a measure identifying the drivers as independent contractors and defining the relationship between the roughly 200,000 app-based drivers in the state and their transportation network companies, including Uber, Lyft, DoorDash, and Instacart.
The settlement raises questions about whether the ballot questions will go forward, but the SJC said legally there is nothing to stop them.
While both the tech company-backed questions and the unionization ballot proposal put forth by 32BJ SEIU were challenged – on the grounds that they packed in too many unrelated topics to be fit for a simple yes or no vote – the high court said a version of the contractor question and union question can move forward.
Justice Gabrielle Wolohojian, sworn in just two months ago and the newest SJC justice, wrote both opinions for a unanimous court.
“We see no risk that voters would be unable to affirm or reject each petition as a whole; each petition is sufficiently coherent to be voted ‘yes’ or ‘no’ on by the voters,” she wrote of five possible classification initiatives.
Anticipating legal challenges aiming to once again boot the measure from the ballot, as the court did in 2022, the tech company-backed coalition hedged their bets by submitting nine versions of the initiative, ranging from a bare bones classification of drivers as independent contractors to a detailed accounting of driver terms and benefits.
All nine versions were certified last year, and the tech companies then narrowed the group to five, which the court described as three “long-form” and two “short form” versions.
The most detailed language version would establish that the drivers are independent contractors entitled to some benefits, like a minimum wage of $18 an hour, accident insurance paid for by the companies, and some disability and medical benefits for drivers who are injured or killed while online with the company’s application or platform.
Proponents say this goes beyond what is owed to independent contractors, which is how the companies have been defining their drivers.
“This is a huge win and a great day for rideshare and delivery drivers,” Flexibility and Benefits for Massachusetts Drivers campaign spokesperson Conor Yunits said in a statement after the SJC ruling but before the announcement of a legal settlement. The coalition had, at earlier points, referred to the New York settlement agreement as a model for what Massachusetts might enshrine into law.
Opponents, represented by labor organizations like the Massachusetts AFL-CIO, argue that the ballot process is an attempt to carve out an exclusive area of law for ride-share companies that falls short of state protections guaranteed to employees. The ballot measures, they argued unsuccessfully, would affect so many downstream worker protections and state obligations that it would be extremely difficult for voters to parse the impacts.
The SJC’s decision “is a tremendous disappointment,” said Chrissy Lynch, Massachusetts AFL-CIO President and Massachusetts is Not for Sale campaign chair. In an interview just after the ruling, the union group’s general counsel, Nikki Decter, said the decision is “thin” and ignores a wealth of ballot initiative law. Beyond that, Lynch said, an expensive ballot campaign would be a tremendous drain on union resources that could be directed elsewhere during a significant national election cycle.
“In addition to just the huge disservice that we think this SJC decision has really done – for the workers, the taxpayers, the law abiding businesses, the consumers who would be impacted by yes votes in November if this were to pass – I think it sets our ballot initiative law back in a devastating way that I think showcases to the world that Massachusetts is, in fact, for sale if you come in with enough money,” Lynch said.
In a statement accompanying the settlement announcement, Lynch struck a sunnier note.
“Uber and Lyft’s free ride is over,” she said. “This settlement includes a comprehensive package of strong wages, benefits, and protections for the drivers that these corporations have been exploiting for years. We deeply appreciate AG Campbell’s hard work holding these corporations rightfully accountable to Massachusetts employment laws.”
In ruling on the rideshare measures, the SJC concluded Campbell’s summaries of the ballot measures were “fair and concise” by the requirements set out under the state Constitution.
Her obligation stopped there, the court said.
It is important, Wolohojian wrote, that the attorney general is not empowered “to advocate
for or against a petition or to intrude into the important educational and advocacy role proponents and opponents of the petitions have to the voters in the public discourse leading up to election day.’”
The argument that seemed to most trouble the justices was, of all things, the sheer number of potential measures. The proponents said they intend to put only one measure before voters – the most comprehensive – which was discussed during arguments before the court in May.
At the time, Wolohojian looked askance at the principle of that many possible measures and the workload it could present for the court, aiming to hand down decisions before the Secretary of State begins printing ballots in July.
“Why aren’t four-fifths of this case moot, although we haven’t been told which four-fifths are?” she asked. “I’ll just put my cards on the table, I don’t think that’s a fair situation for the court to be in.”
Concluding Thursday’s ruling, Wolohojian wrote, “we retain jurisdiction to revisit our rulings and conclusions and, if appropriate, to withdraw this opinion in the event the proponents seek to place more than one petition on the November ballot.”
The court also waved through a ballot measure that would allow app-based drivers to unionize and collectively bargain under a specific set of guidelines.
Opponents challenged the initiative, claiming letting transportation network drivers organize and collectively bargain with transportation network companies is unrelated to parts of the initiative that would subject the results of any collective bargaining to supervision, review, and approval by the Commonwealth’s Secretary of Labor.
“We conclude that the petition seeks to establish a multistep collective bargaining scheme in which the Secretary of Labor’s role is an integrated component and, therefore, that the subjects of the petition are related,” Wolohojian wrote.
Proponent Roxana Rivera, assistant to the president of 32BJ SEIU, cheered the ruling in a statement. “[W]e know the public is eager to finally grant drivers the basic workplace rights and protections they so desperately need, especially now that the companies also qualified for the ballot with a question that would curtail those rights and protections,” she said.
The Fiscal Alliance Foundation, which unsuccessfully challenged the ballot measure’s certification, said after the ruling that its concerns about the initiative remain.
“We have no doubt that most Massachusetts voters will not be aware of the radical and far-reaching consequences this question will have on labor law, if passed,” said Paul Craney, a spokesman for the Fiscal Alliance Foundation and a plaintiff in the SJC case. Well beyond allowing the drivers to unionize, he said, “it will create a completely new labor category, and in violation of federal labor law.”
Even if the ballot initiative were to pass, Craney said, there may still be room for a federal court challenge arguing that it impermissibly alters unionization protocols beyond the state’s purview.
Though it includes new rules on what drivers are entitled to – like information about a ride in advance, protection from discrimination and retaliation, and explanations and an appeals route if a driver is deactivated – the settlement agreement between Uber, Lyft, and the attorney general is silent on any unionization process, so the ballot initiative could go ahead as expected.
However, the ballot effort has been somewhat polarizing between progressive groups, some of whom would prefer a legislative solution to a high-stakes ballot campaign.
Rivera said the United for Justice group is “now fully prepared to go to the ballot if necessary. We also remain hopeful that legislation can still move in the State House that would make a ballot campaign unnecessary.”
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