Uber, Lyft to pay $328 million to settle wage-theft allegations in New York state

Uber and Lyft agreed to pay a combined $328 million to settle allegations the ride-hailing companies unlawfully withheld wages from drivers and failed to provide mandatory paid sick leave in New York state, Attorney General Letitia James' office said Thursday.

Uber will pay $290 million and Lyft will pay $38 million. The state AG's office said it's the largest wage-theft settlement it's won.

The money will go to drivers affected by the companies' alleged practices. More than 100,000 drivers in New York could be eligible to receive the funds and benefits secured under the agreements, James' office said. Drivers will be notified by mail, email or text about how to file a claim.

"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 said in a statement. "This settlement will ensure they finally get what they have rightfully earned and are owed under the law. 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." 

The settlements, which resolve multiyear investigations, reflect the companies' latest concessions in a standoff with regulators across the country about the level of oversight they should receive and what they owe their drivers. Uber and Lyft have previously fought efforts to reclassify their workers from contractors to employees, for example, a change they said most of their workers opposed.

Uber's settlement represents more than 3% of the $9.23 billion in revenue it generated last quarter. And Lyft's settlement comes to nearly 4% of the $1.02 billion in revenue it reported.

The companies also agreed to ongoing changes in how they pay drivers and offer benefits in the Empire State.

The AG's office alleged the companies incorrectly deducted charges from drivers' wages that should have instead been charged to passengers. For example, the office said that from 2014 to 2017 Uber deducted sales taxes and Black Car Fund fees from drivers' paychecks and misrepresented that it would do so in its terms of service. And Lyft, the AG alleged, deducted an 11.4% administrative charge that equaled the amount of the sales tax and Black Car Fund fees between 2015 and 2017.

Both companies also failed to provide paid sick leave as required under state and New York City law, James alleged.

Under the agreements, Uber and Lyft will be required to give drivers outside of New York City a guaranteed earning minimum of $26 per hour, which will be adjusted each year for inflation. The minimum rate would apply from "dispatch to completion of the ride," according to a press release from the AG's office. Drivers in New York City already receive guaranteed minimum earnings under local regulations.

Drivers also will get guaranteed paid sick leave in New York state. For every 30 hours worked, they'll be able to earn one hour of sick pay up to 56 hours per year, the AG's office said. Both companies will make updates so drivers can request sick leave through the apps, according to the press release.

Uber and Lyft also agreed to give drivers compensation breakdowns, the AG's office said. The companies will have to notify drivers how much a rider paid for each ride and give drivers an in-app chat tool to discuss earnings and work conditions. Uber and Lyft also must allow drivers to appeal deactivation from their platforms.

Uber and Lyft both called the agreements with the AG a "win" in statements following the announcement, and both denied wrongdoing.

"This is a win for drivers, and one we are proud to have achieved with the New York Attorney General's Office," Jeremy Bird, Lyft's chief policy officer, said in a statement. "New York has long been a leader in providing drivers portable benefits through flexible earning opportunities with its Black Car Fund, and this agreement expands upon that foundation. We look forward to continuing this work in order to provide New York drivers the independence and full range of benefits available to those in other states, like California and Washington."

"The agreement is a win for drivers across New York State who can now enjoy both the flexibility that is so important to them, while also having new benefits and protections like a minimum earnings standard and paid sick leave," Uber wrote in a blog post.

Lyft also wrote in a blog post that it doesn't expect a material impact on its profit and loss statement from the event and that it accrued for the agreement in Q2 of 2023. Lyft said it expects to pay about $20 million of the settlement in the fourth quarter, with the rest in 23 monthly payments.

WATCH: New York City taxis battle Uber and Lyft for riders