Lyft to pay $272.5M to settle driver misclassification lawsuit

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 let it avoid the “costs and distraction of protracted litigation” and keep management focused on its business objectives.

The case stems from a lawsuit the California Labor Commissioner’s Office filed in August 2020, alleging that Lyft treated drivers as independent contractors rather than employees as state law then required. The suit alleged that drivers were denied minimum wage and overtime, along with other benefits and protections given to employees, including paid sick leave and timely wage payments. California Labor Commissioner Lilia García-Brower said in a statement that the settlement is “about the workers who came forward and spoke up,” adding that her office will forgo its own 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 when California was grappling with whether gig-economy workers were independent contractors or employees. Today, Lyft and Uber drivers are classified as contractors under Proposition 22, a 2020 ballot measure that carved companies like DoorDash, Lyft, and Uber out of Assembly Bill 5, a 2019 state law that would have required them to classify gig workers as employees with minimum wage, workers’ compensation, and other benefits. Lyft and other gig-economy companies kept classifying drivers as contractors even after AB 5 took effect, which led to legal action from the Labor Commissioner’s Office, the California Attorney General, and city attorneys in Los Angeles, San Diego, and San Francisco, along with private actions under the state’s Private Attorneys General Act; the cases were coordinated in San Francisco Superior Court in September 2021.

A Lyft spokesperson said in a statement that the “vast majority” of California rideshare drivers have always wanted to be independent contractors, that voters affirmed that by passing Proposition 22, and that Lyft has gone further than Prop 22 requires by becoming the only rideshare company with a fee cap. The settlement closes the legal chapter for Lyft, though Uber still faces a similar lawsuit from the Labor Commissioner’s Office.

Why it matters

The settlement shows that pre-Proposition 22 driver-classification claims still carry real financial exposure for gig platforms years after the ballot measure settled how drivers are classified going forward. With Uber still facing its own Labor Commissioner lawsuit over the same question, the size of Lyft’s payout gives both companies — and regulators elsewhere weighing similar gig-worker rules — a concrete benchmark for what unresolved pre-2020 claims can cost.