Auditor report examines hypothetical driver benefits

BOSTON (SHNS) – A Superior Court judge will soon be asked to decide whether Uber and Lyft are violating state law by treating their drivers as independent contractors instead of employees. And if the companies indeed have been misclassifying workers, a new report warns they likely shortchange the state tens of millions of dollars per year for public benefit programs.

Quantifying a supercharged hypothetical, Auditor Diana DiZoglio’s office published an 15-page analysis Tuesday estimating the on-demand ride platforms would have owed the state about $266 million in combined workers’ compensation, unemployment insurance and the paid family and medical leave payments over the past decade if their tens of thousands of drivers were treated as full employees.

The report’s author stressed that the figure is a “conservative” best estimate produced with some constraints on available data. The 10-year amount owed to state programs could range as low as $89 million or as high as $713 million, depending on how much each driver worked.

Figures also hinge on whether drivers should in fact be treated as employees with the rights and benefits that status entails. If the status quo at Uber and Lyft is legal — which the companies maintain is the case, even as they work to rewrite statute to more explicitly define drivers as contractors — “there may be no change in the payments owed,” the report said.

“Were TNC drivers to be recognized as employees, the Division of Local Mandates (DLM) believes the state could continue to foster innovation in the transportation sector while ensuring drivers have access to vital worker benefit programs, appropriately funded with employer contributions,” DLM Supervising Policy Research Analyst George Chichirau wrote.

The Division of Local Mandates is part of the state auditor’s office, tasked with determining whether laws present unfunded mandates to municipalities and providing recommendations to address other “issues harming municipal budgets.”

In a statement, DiZoglio said DLM “conducts analyses of important issues facing our communities.”

“This particular issue was raised to us by Senator Lydia Edwards who pointed to how other states have taken meaningful steps, in recent years, to establish fair labor practices, ensure adequate contributions to state benefit programs and better-define the relationship between TNCs and their drivers,” DiZoglio said.

Edwards, a Boston Democrat, is the lead sponsor on union-backed legislation that would explicitly define transportation network and delivery network company drivers as employees instead of independent contractors. She has been vocal about her support for the issue, criticizing Uber and Lyft earlier this month for what she described as “the same exploitation we’ve seen over and over again.”

The report, which is titled “Assessing Transportation Network Companies’ Financial Obligations to Massachusetts Programs,” says “critical questions have been raised about the adequacy of TNC contributions to state benefit programs” in Massachusetts.

The report is likely to serve as additional ammunition in an already-contentious fight. A trial begins next month in a state lawsuit against Uber and Lyft, alleging they have violated labor laws for years by classifying their drivers as independent contractors.

Uber and Lyft contend that drivers are in fact properly defined under state law as contractors, not employees, and that most of their workers prefer to stay that way.

“Drivers want to stay independent because most are looking for flexible income opportunities that traditional employment simply cannot provide. Nearly all drive because of the independent contractor status and not in spite of it. They can make real-time decisions about where and when to work without any form of advance notice,” Brendan Joyce, Lyft’s public policy manager in Massachusetts, told lawmakers at a hearing last month. “Some have claimed that we could provide the same level of flexibility drivers currently enjoy under an employment model simply because the law doesn’t say otherwise, but laws have practical implications, and the reality is that traditional employees cannot find minute-by-minute flexibility that is comparable to driving with Lyft.”

At the same time, Uber and Lyft — along with delivery platforms DoorDash and Instacart, who were not examined in the analysis from DiZoglio’s office — are funding a ballot question campaign that would declare drivers to be independent contractors, while potentially extending some new benefits.

Some company leaders have said the stakes in the attorney general’s lawsuit are huge, hinting that if they are forced to fulfill traditional employee status for all drivers, it could dramatically alter their business models, with impacts for customers.

“It’s based on dynamic pricing, right? You’re coming out of Fenway Park, you’re coming out of Gillette in your district. You pay a premium as a rider that then incents an independent contractor who may be on another app, at home, getting off another job, to look at the map that one of the drivers looked at earlier and say, ‘Hey, I could go make some more money now than I could have an hour or two ago,'” Joyce told lawmakers. “That dynamic pricing model, being based on an independent contractor workforce, would be totally upended under an employment model.”

Reacting to the report’s publication Tuesday, Edwards called it “the missing puzzle piece.”

“I don’t know how we can come to a settlement or legislative compromise without knowing how much money we have been shorted,” Edwards said in a statement. “We stand at a critical juncture where we can either continue to allow companies to exploit their workers or we can ensure a fair, equitable work environment for all.”

To build out his projections, Chichirau said he asked the Department of Public Utilities’ TNC Division, which regulates the industry, for data about the number of drivers and how much they earned. However, the department declined to provide that information, saying it was not a public record, according to the report.

Instead, Chichirau “approximated the number of drivers” by reviewing how many TNC vehicle inspections the state Registry of Motor Vehicles conducted, which totaled about 76,000 between September 2022 and August 2023. (Chichirau wrote that he opted for that methodology instead of examining the number of background checks conducted on prospective drivers because there’s “no way to know from the available data how many applicants do in fact become drivers after sign-up.”)

The report also had to look to outside state sources for data about how much money Uber and Lyft drivers made. Chichirau used a report published last year by the Drivers Demand Justice coalition, a labor-backed group that opposes the company-backed ballot question and is fighting for its own measure that would give drivers a path to unionization.

“While this report is from an advocacy group and relies on survey data, its results track closely with findings from TNC data from other states, as seen in a 2024 report commissioned by the Minnesota Department of Labor and Industry,” Chichirau wrote. “Notwithstanding the closeness of this tracking, we would have preferred to use data from TNCs or different agencies of the Commonwealth that capture relevant information. This information was not provided to us, however, necessitating our reliance on a study that we believe provides a fair representation of the relevant data.”

The Drivers Demand Justice study estimated that the median Massachusetts ride-for-hire driver earned $12.82 per hour after accounting for unpaid work time and expenses such as gas. The Minnesota study Chichirau referenced similarly estimated that the median Twin Cities metro-area driver earned a net $13.63 per hour after expenses.

Based on those inputs, Chichirau estimated ride-for-hire drivers in Massachusetts earned a combined $1.43 billion in 2023.

If those drivers performed that work as employees, he said, the companies likely owed the state about $17.4 million in workers compensation, $20.7 million in unemployment insurance and $9 million in PFML contributions that they did not make.

Accounting for a steady increase in the number of drivers since Lyft launched in 2013, the report’s “best estimate” model said the state lost out on about $105 million in workers compensation, $125 million in UI and $36 million in PFML between 2013 and 2023.

Chichirau said those figures “align with third-party research in other states.”

“We must ensure that TNCs are making required contributions to sustain worker benefits and protections that maintain a level playing field across transportation industries,” he wrote. “This analysis underscores the need for greater oversight and data reporting requirements for TNCs operating in Massachusetts. We encourage the State Legislature and Administration to enact measures enforcing full transparency of driver earnings, hours worked, and other vital employment statistics.”

Supporters of legislation and a ballot question that would explicitly define drivers as independent contractors criticized the auditor’s report Tuesday as flawed and “politically motivated.”

“The State Auditor’s first scenario correctly notes that Massachusetts app-based rideshare drivers are currently classified as independent contractors, and as such they make no claims on the state’s UI trust fund or other public benefit funds, and no payments are owed,” Conor Yunits, a spokesperson for the industry-backed ballot question campaign, said in a statement. “The second scenario is wildly flawed, and draws largely from a study that the authors admit is partisan and which was funded by labor groups that have endorsed and contributed to the Auditor in past elections. The Auditor’s report also fails to note that rideshare and delivery platforms increase economic activity in Massachusetts by around $8.3 billion annually, and this increased economic activity generates over $503 million in state and local tax revenue. A reputable, professional auditor would consider all the relevant datasets before reaching conclusions, rather than beginning with a predetermined, politically-motivated conclusion first and building out an analysis to achieve it.”

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