Lyft to pay $272.5M to settle California driver classification lawsuit
Lyft will pay $272.5 million to resolve a lawsuit that accused the ride-hailing firm of breaking California law by treating drivers as independent contractors instead of employees.
In a regulatory filing, the company stated that the settlement would help it steer clear of the "costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives."
Attempts to obtain a comment from Lyft were unsuccessful.
The case originated from a lawsuit brought by the California Labor Commissioner's Office in August 2020, which claimed Lyft classified drivers as independent contractors when state law at the time required them to be employees.
According to the lawsuit, drivers were deprived of minimum wage, overtime, and other benefits and protections granted to employees, such as paid sick leave and prompt wage payments.
"This settlement is about the workers who came forward and spoke up. Their voices made this outcome possible," California Labor Commissioner Lilia García-Brower said in a statement, noting that the LCO will give up its portion of the settlement and channel those funds to drivers who submitted wage claims.
The agreement, which requires a judge's approval, addresses alleged violations between April 6, 2016 and December 15, 2020 — a time when California was debating whether gig economy workers should be independent contractors or employees.
Currently, drivers for app-based services such as Lyft and Uber are classified as contractors following the passage of Proposition 22 by voters in 2020. That ballot measure created an exemption from Assembly Bill 5, a 2019 state law that mandated companies like DoorDash, Lyft, and Uber to classify gig workers as employees, providing them with minimum wage, workers' compensation, and other benefits.
Even after AB 5 was enacted, Lyft, Uber, and other gig-dependent companies kept classifying their drivers as contractors. This prompted legal action from the LCO, California Attorney General, and the City Attorneys of Los Angeles, San Diego, and San Francisco, along with private suits under California's Private Attorneys General Act. The cases were consolidated in San Francisco Superior Court in September 2021.
The settlement brings this legal matter to a close for Lyft, though Uber continues to face a similar lawsuit from the LCO.
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