IT WAS SUMMER 2020, the global pandemic starting to truly disrupt routines of work and home, and attorneys general on two coasts took Uber and Lyft to court for violating the strictest worker classification laws in the United States.
The companies decided their preferred leverage was to change state law through the ballot box.
Four years later, California is living with the ride-share giants’ preferred law, while the attorney general in Massachusetts decided to drop a promising court case and agree to a $175 million settlement that gave drivers some protections and blocked a ballot fight this year, but did not address the fundamental question of whether drivers are employees or independent contractors.
In interviews with Attorney General Andrea Campbell and top aides, they said they were confident they could win the court case but worried the verdict would have been severely blunted by a ballot campaign. Once the state’s Supreme Judicial Court cleared for the ballot all of the questions put forward by the tech giants, Campbell made the decision to settle and hastily brought the negotiations to a close the very same day.
“A win in court might have given drivers restitution for pay they were owed in the past, but a successful ballot initiative would have wiped out its impact going forward,” Campbell said in a statement Tuesday, responding to criticism of the settlement. “Our deal with Uber and Lyft made sure that drivers can have both.”
The settlement, finalized on what the AG’s office describes as the eve of victory in Superior Court, has drawn fire from some labor advocates, including one of Campbell’s former rivals for the top prosecutor spot, who say it leaves too big a carve-out for the companies. Other unions cheered the settlement as setting a needed floor for driver protections and side-stepping a costly and all-consuming ballot season.
For the attorney general’s office, the cross-country analogue with California was reason for serious concern.
Proposition 22, in California, was the single most expensive ballot campaign in US history, swallowing $200 million and ending 2020 with a law that classified app-based drivers as independent contractors and established some minimum benefits.
“We really didn’t want to see that happen,” said deputy attorney general Abby Taylor, the lead settlement attorney for the state. “What we wanted to happen was for drivers to have a guarantee of good wages and benefits that – if they could not be pursuant to our wage and hour laws – would at least mimic our wage and hour laws.”
With a watchful eye on the situation in California, then-attorney general Maura Healey’s office bore down on its suit. Healey argued that Uber and Lyft, the giants of the ride-share industry, were deliberately ignoring Massachusetts’ so-called “ABC Test” and improperly treating their drivers as independent contractors rather than employees.
The suit survived a motion to dismiss in March 2021. The raging pandemic directed more and more focus toward the precarious position of gig workers when it came to benefits like sick time or health care coverage. Tech company eyes turned again to the ballot box.
Uber and Lyft started to replicate the California playbook, directing millions toward a ballot effort in Massachusetts echoing Proposition 22. The ballot question, challenged by a labor coalition still stinging from the California loss, was ultimately thrown out by the Supreme Judicial Court for including a provision about third-party liability that the court concluded was not substantially related to the classification question and therefore invalidated the entire ballot effort.
The companies did not give up, however. The business model of the tech companies, they argue, depends on flexible schedules only possible if the drivers are considered independent contractors. Opponents, including then-AG Healey, say there is no inherent conflict between employee status and the flexibility of the gig work system.
Expecting another legal challenge, the ride-share coalition last year put forward nine versions of a potential measure to the attorney general’s office to be certified for the 2024 ballot. All, in new attorney general Campbell’s view, passed muster, as did a union-backed measure that would allow app-based drivers to unionize and collectively bargain. The tech company-backed coalition submitted five versions to the Secretary of State, which were immediately challenged before the high court by the union-backed coalition.
The high court weighed the ballot measures and the attorney general’s trial division began making its arguments in Suffolk Superior Court before lone Superior Court Judge Peter Krupp. For months in the background, Taylor and her team were talking with Uber and Lyft about a possible settlement. Campbell received regular updates from the team and weighed in at key junctures, a spokesperson said.
“We had an amazing trial team that fought really hard on this case for four years, and I think it was really clear that they were going to win,” Taylor said. “That was clear to the company and clear to our trial team. And I think the companies did not want a circumstance in which they had a bad decision out of a Massachusetts court.”
Both sides weighed their options, she said. Whenever possible, Uber and Lyft have pushed for settlements that let them pay out without admitting liability, and guarantee them safety from current state labor law enforcement actions.
“We were in a bad position because of these industry-sponsored ballot initiatives that we felt confident were going to move forward,” Taylor said. The companies were “going to spend a whole lot of money on getting them passed. And, frankly, for the average voter who’s kind of not in the weeds on this, we thought it had a pretty good chance of succeeding.”
In a decision the morning before the AG’s suit was set to go to closing arguments, the Supreme Judicial Court cleared the measures for ballot – provided the coalition held to the pledge to put only one before voters.
The attorney general’s office and labor coalitions stared out at months of an expensive and possibly losing ballot fight. A verdict affirming that the drivers were employees would be a boon, but it also set up future appeals.
California’s ABC law, modeled after the Massachusetts version, puts the burden on employers to prove that their workers are independent contractors rather than employees through a specific three-part test. A federal appeals court just upheld that law in June after years of challenges from driver and delivery companies.
“My understanding is that the AG’s trial has gone exceptionally well,” Massachusetts AFL-CIO general counsel Nikki Decter said just before the settlement was announced and cheered by the labor unions. “I would say that puts the companies on terribly bad footing, because they are looking at a potential verdict that would say what we all know, which is that their workers are employees under Massachusetts law, and so they will be looking at a ballot initiative fight where they are trying to take away the rights, benefits, and protections of their own workers.”
It would be expensive and distracting during a tense presidential election year, but she didn’t expect a “cakewalk” for the companies.
“We heard the morning of the settlement that the SJC cleared the ballot initiative to move forward,” Taylor said. “If it had turned out that the SJC made the determination that there was no ballot initiative, there probably would have been no settlement. So I guess, all to say, there were a lot of conversations. There were a lot of stops and starts to those conversations, and there were a lot of points at which we were not sure that there was going to be a settlement, up ’till, like, two hours before.”
Campbell was the ultimate decision maker, a spokesperson said. The primary goal was protecting the dignity and well-being of drivers, the attorney general said.
“I was always asking the team: how can we get the best outcome for drivers?” the attorney general said via statement. “And at the outset, that was taking these companies to court, and then, ultimately, it was through a settlement. The companies were trying to sell the voters a false choice of flexibility or the benefits and protections drivers deserve. This settlement proves the companies can provide both, and it put an end to the companies’ efforts to underpay their drivers in Massachusetts.”
States’ fights over the status of gig work have national consequences. California’s strict ABC law – codified in 2019 and kicking off the state enforcement action in 2020 and the subsequent ballot initiative – was used as a model for new federal labor rules about employees versus independent contractor status.
In landing on final settlement terms in Massachusetts, attorneys reviewed settlements and gig-work laws in New York, New Jersey, Minnesota, Washington, and California.
“We looked at all of these examples, we looked at the ballot initiative, and, frankly, sort of picked and chose what we thought were best of all the examples,” Taylor said.
A Lyft spokesperson referred only to the company’s blog post and an explainer on the terms of the settlement. Uber, which has a similar public post, did not respond to a request for comment on the suit or its timeline.
In internal documents explaining the settlement, Lyft maintains that its drivers were and remain independent contractors. The company admits no liability under state law for classifying its drivers that way.
“This agreement is an example of what independent, flexible work with dignity should look like in the 21st century,” Uber’s post reads. “We are thrilled to see more policymakers supporting portable benefits and innovative frameworks to improve independent work.”
Under the final terms, Uber and Lyft are bound to pay at least $32.50 an hour plus annual raises. Drivers are entitled to health insurance, paid sick time, medical leave, and occupational accident insurance, though they will still have to pay for their own car payments and insurance and won’t be entitled to the traditional model of unemployment benefits or worker’s compensation.
The settlement goes further than some other states in requiring pay and accrued health coverage hours for all periods between when a driver starts a pickup through drop-off, but not the time between driving passengers.
Shannon Liss-Riordan, a labor lawyer who ran against Campbell for AG and founding member of the Massachusetts Is Not for Sale coalition that advocates for driver employee status, criticized the settlement agreement in the Boston Globe.
“Once you do the math and consider the expenses, I doubt they would be paid much more, if anything, above minimum wage,” she said of the settlement. “This allows Uber and Lyft to continue shifting the cost of running a business to their low-wage workers, and this agreement does absolutely nothing to rectify that.”
She added that Campbell has “thrown away” the chance to get a ruling in court that Uber and Lyft were breaking the law. “There’s a lot of room in here for [Uber and Lyft] to do a lot of mischief,” she said.
Campbell’s office counters that there is room for future legislation to strengthen or clarify the company obligations, and in no way impedes the ongoing ballot and legislative effort to offer the drivers’ union rights.
“We’ve made sure that Uber and Lyft are being held accountable for providing the minimum wages and benefits that everyone deserves, and those wages and benefits are the precedent,” Campbell said via statement. “It’s a floor that can and should be built upon.”
Avoiding the ballot fight was a win in itself, her office argues. In the settlement, Uber and Lyft agree not to fund or support the 2024 ballot effort, and have since confirmed the effort is dead.
For her part, Campbell’s predecessor offered brisk praise.
“Our lawsuit against Uber and Lyft was always about fairness for drivers,” Healey said in a statement. “I congratulate Attorney General Campbell and her team for securing this settlement that delivers historic wages and benefits to right the wrongs of the past and ensure drivers are paid fairly going forward.”
Across the country, California is still waiting with bated breath after years of lawsuits made their way up to the state’s highest court, which is expected to rule in the next month on the constitutionality of Proposition 22. Massachusetts voters and lawmakers may yet choose to expand app-based driver rights, but Campbell’s office maintains their final call was the right one.
“At the end of the day,” Taylor said, “although we never like to settle cases on the eve of what we thought was a victory, it made sense for those practical reasons in these particular circumstances.”
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