Lyft agreed to pay $272.5 million to settle a California lawsuit alleging the company misclassified drivers as independent contractors instead of employees, Ars Technica reported.
The company stated in a regulatory filing that the agreement will allow it to avoid the “costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives.” A judge must still approve the settlement before it takes effect.
The California Labor Commissioner’s Office filed the underlying lawsuit in August 2020, alleging Lyft denied drivers statutory benefits such as minimum wage, overtime, paid sick leave, and timely wage payments. The settlement covers alleged violations dating from April 6, 2016, to December 15, 2020.
Labor Commissioner Lilia García-Brower said in a statement that the agency will forgo its portion of the settlement and route those funds to drivers who submitted wage claims. “This settlement is about the workers who came forward and spoke up. Their voices made this outcome possible,” García-Brower said.
Voters approved Proposition 22 in 2020, creating a carve-out from Assembly Bill 5, a 2019 statute that required companies like DoorDash, Lyft, and Uber to classify gig workers as employees. Today, drivers for app-based ride-hailing services operate as independent contractors under that ballot measure.
Regulators and city attorneys from Los Angeles, San Diego, and San Francisco filed enforcement lawsuits after companies continued treating drivers as contractors under AB 5. Those actions, along with private suits under California's Private Attorneys General Act, were coordinated in San Francisco Superior Court in September 2021.
A Lyft spokesperson said the settlement “closes a chapter from a very different time, before Prop 22,” and maintained that drivers have always been properly classified under the law. The spokesperson added that Lyft now operates with a fee cap.
Uber still faces an active lawsuit from the Labor Commissioner’s Office that makes similar misclassification allegations.
