Lyft agrees to $272.5 million settlement over driver misclassification in California
Quick Look
- Lyft has agreed to pay $272.5 million to settle a lawsuit alleging it violated California law by misclassifying drivers as independent contractors instead of employees, denying them minimum wage, overtime, and benefits.
- The settlement covers alleged violations from April 6, 2016 to December 15, 2020, and still requires judicial approval.
- California Labor Commissioner Lilia García-Brower praised the workers who came forward, noting the state will forgo its share to direct funds to affected drivers.
AI-generated summary
Why It Matters
The lawsuit originated from allegations that Lyft misclassified drivers as independent contractors under California law, denying them employee benefits such as minimum wage, overtime, and paid sick leave. This occurred during a period when the state was determining the proper classification of gig economy workers, prior to the passage of Proposition 22 in 2020, which exempted app-based drivers from Assembly Bill 5’s employee classification requirements.
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.”
Lyft could not be reached for comment.
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 an 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.
The settlement closes this legal chapter, at least for Lyft. Uber still faces an LCO lawsuit that makes similar allegations.
What to Watch
AI outlook — possibilities, not facts
The settlement will receive judicial approval in the coming weeks.
Likely · Within weeks
Lyft will continue to classify its drivers as independent contractors under Proposition 22.
Very likely · Within months
Open Questions
- Will the settlement fully resolve all pending wage claims from drivers?
- How will Lyft adjust its business model to prevent future misclassification risks?
- What is the expected timeline for judicial approval of the settlement?
