Lyft has agreed to pay $272.5 million to settle a lawsuit accusing the ride-hailing company of violating California law by misclassifying its drivers as independent contractors rather than employees.
The company said in a regulatory filing that it believes the settlement will allow it to avoid the "costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives". Lyft could not be reached for comment.
The settlement stems from a lawsuit filed by the California Labor Commissioner's Office in August 2020, which accused Lyft of treating drivers as independent contractors rather than as employees, as state law required at the time. The suit alleged that drivers were denied minimum wage and overtime as well as other benefits and protections provided to employees, including paid sick leave and timely 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, adding that her office would forgo its share of the settlement and direct those funds to drivers who filed wage claims.
The settlement, which still requires a judge's approval, covers alleged violations from April 6, 2016 to December 15, 2020 — a period in which California was fighting over whether workers in the booming gig economy were independent contractors or employees.
Today, drivers for app-based transportation services such as Lyft and Uber are classified as contractors after voters passed ballot measure Proposition 22 in 2020. The measure created a carve-out from Assembly Bill 5, a 2019 state law that would have required companies including DoorDash, Lyft and Uber to classify gig workers as employees, entitling them to minimum wage, workers' compensation and other benefits.
Even after AB 5 took effect, Lyft, Uber and other companies relying on gig workers continued to classify their drivers as contractors. That eventually led to legal action from the Labor Commissioner's Office, the California attorney general and the city attorneys of Los Angeles, San Diego and San Francisco, as well as private actions filed under California's Private Attorneys General Act. The cases were coordinated in San Francisco Superior Court in September 2021.
The settlement closes this legal chapter, at least for Lyft. Uber still faces a Labor Commissioner lawsuit making similar allegations — which means the classification fight that Proposition 22 was meant to end is still running through California's courts, five years after voters weighed in.
