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

Lyft has agreed to pay $272.5 million to settle a lawsuit accusing the ride-hailing company of violating California law by misclassifying drivers as independent contractors, instead of 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.”

The settlement stems from a lawsuit filed by the California Labor Commissioner’s Office in August 2020 that accused Lyft of treating drivers as independent contractors rather than as employees, as required under state law at the time.

The lawsuit 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 the LCO will forgo its share of the settlement and direct those funds to drivers who filed wage claims.

The settlement, which still must be approved by a judge, covers alleged violations from April 6, 2016, to December 15, 2020 — a period California was grappling with whether workers in the booming gig economy were independent contractors or employees.

Today, drivers for app-based transportation services like Lyft and Uber are classified as contractors after voters passed ballot measure Proposition 22 in 2020. The ballot measure provided a carve-out from Assembly Bill 5 , a state law passed in 2019 that required companies like 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 that relied on gig workers continued to classify their drivers as contractors. That eventually led to legal action from the LCO, 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.

“If approved, this settlement closes a chapter from a very different time, before Prop 22,” a Lyft spokesperson said in an emailed company statement. “The vast majority of rideshare drivers in California have always wanted to be independent contractors, and voters affirmed that when they passed Prop 22 in 2020, giving drivers new benefits and protections while preserving their flexibility. And since then, Lyft has gone further than Prop 22 requires, becoming the only rideshare company with a fee cap.

“Lyft believes drivers have always been properly classified under the law, and we’re glad to put this case behind us. We remain laser focused on helping create more earnings for drivers and more affordable rides for riders.”

The settlement closes this legal chapter, at least for Lyft. Uber still faces an LCO lawsuit that makes similar allegations.

Update: This article was updated to include a comment from Lyft.