Lyft is paying $272.5M to settle lawsuit over how it classified drivers

Lyft has reached a $272.5 million settlement with California authorities in a lawsuit alleging the ride-hailing company misclassified drivers as independent contractors rather than employees, in violation of California law. The company believes the settlement will help it avoid the "costs and distraction of protracted litigation," allowing it to focus on its business objectives.

The case was initiated by the California Labor Commissioner’s Office in August 2020, which accused Lyft of failing to provide drivers with minimum wage, overtime, and other employee benefits, such as paid sick leave and timely wage payments. California Labor Commissioner Lilia García-Brower praised the workers who came forward, stating that their voices made the settlement possible and that the LCO will not receive its share of the funds but will instead direct them to drivers who filed wage claims.

The settlement, yet to be approved by a judge, covers alleged violations from April 6, 2016, to December 15, 2020, an era when California was debating whether gig economy workers were independent contractors or employees. Following the passage of Proposition 22 in 2020, drivers for gig economy services like Lyft and Uber are now classified as contractors.

However, Lyft, Uber, and other gig economy companies continued to classify their drivers as contractors even after AB 5 took effect, leading to legal action from the LCO, California Attorney General, and City Attorneys of Los Angeles, San Diego, and San Francisco. The cases were coordinated in San Francisco Superior Court in September 2021.

The settlement brings this legal chapter to a close for Lyft, while Uber still faces a similar LCO lawsuit.