BOSTON, May 13 (Reuters) - Uber Technologies ( UBER )

and Lyft ( LYFT ) are set to face trial on Monday in a U.S.

lawsuit by Massachusetts' attorney general alleging the

ride-share companies misclassified their drivers as independent

contractors rather than more costly employees.

The non-jury trial in Boston comes amid broader legal and

political battles in the Democratic-led state and elsewhere

nationally over the status of drivers for app-based companies

whose rise has fueled the U.S. gig worker economy.

Massachusetts Attorney General Andrea Joy Campbell is asking

a judge to conclude that drivers for Uber ( UBER ) and Lyft ( LYFT ) are employees

under state law and therefore entitled to benefits such as a

minimum wage, overtime and earned sick time.

Her office claims the companies for years misclassified

thousands of Massachusetts drivers and cannot meet a three-part

test under the state's worker-friendly laws that would allow

them to be deemed independent contractors.

Studies have shown that using contractors can cost companies

as much as 30% less than using employees.

Uber ( UBER ) and Lyft ( LYFT ) argue that they properly classified the

drivers, saying they are not transportation companies that

employ drivers but technology companies whose apps facilitate

connections between drivers and potential riders.

The companies warn that, should Suffolk County Superior

Court Judge Peter Krupp rule against them, they would be unable

to maintain their flexible business model in the state and may

be forced to cut or cease operations in Massachusetts.

Rohit Singla, a lawyer for Lyft ( LYFT ), during a Thursday pre-trial

hearing said his client's "current business cannot support

drivers as employees, is not set up for that and wouldn't work

that way."

The case is going to trial a week after Massachusetts'

highest court heard arguments over whether to allow an

industry-backed ballot measure to go before voters in November

that defines the drivers as contractors but entitles them to

some new benefits.

The court appeared open to allowing some version of that

proposal to go on the ballot along with a rival, labor-backed

ballot measure that seeks to allow the drivers to unionize.

The lawsuit going to trial was filed in 2020 by Campbell's

predecessor, Maura Healey, now the state's Democratic governor.

Should the state prevail, it has said the companies could face

large penalties for not properly classifying their drivers.

By not classifying their Massachusetts drivers as employees,

Uber ( UBER ) and Lyft ( LYFT ) avoided paying $266.4 million into workers'

compensation, unemployment insurance and paid family medical

leave over 10 years, according to a report by the state auditor.