Lyft has agreed to pay $272.5 million to settle a California lawsuit accusing the ride hailing company of improperly classifying drivers as independent contractors rather than employees. The proposed agreement still requires approval from a judge.
The lawsuit was filed by the California Labor Commissioner’s Office in August 2020. It alleged that Lyft treated drivers as contractors when California law at the time required them to be classified as employees.
According to the complaint, the classification deprived drivers of minimum wage and overtime compensation. The lawsuit also alleged that drivers were denied employee protections and benefits, including paid sick leave and timely wage payments.
Lyft addressed the proposed settlement in a regulatory filing. The company said it believes the agreement will let it avoid the “costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives.”
The covered period stretches from April 6, 2016, through December 15, 2020. During that span, California was wrestling with whether workers in the expanding gig economy should legally be treated as employees or independent contractors.
California Labor Commissioner Lilia García-Brower credited the workers who raised concerns about Lyft’s practices. “This settlement is about the workers who came forward and spoke up. Their voices made this outcome possible,” she said in a statement.
García-Brower also said the Labor Commissioner’s Office will forgo its share of the settlement. Those funds will instead be directed to drivers who filed wage claims, according to her statement.
The legal framework for app based transportation drivers has changed since the period covered by the lawsuit. Lyft and Uber drivers are currently classified as contractors after California voters approved Proposition 22 in 2020.
Proposition 22 created a carveout from Assembly Bill 5, a California law passed in 2019. That law required companies such as DoorDash, Lyft, and Uber to classify gig workers as employees, giving them access to minimum wage, workers’ compensation, and other benefits.
Lyft, Uber, and other businesses dependent on gig workers continued classifying drivers as contractors even after Assembly Bill 5 took effect. That decision eventually brought legal action from several California government offices and private parties.
The Labor Commissioner’s Office, the California Attorney General, and the City Attorneys of Los Angeles, San Diego, and San Francisco pursued cases. Private actions were also filed under California’s Private Attorneys General Act.
Those cases were coordinated in San Francisco Superior Court in September 2021. The proposed $272.5 million payment would resolve the legal chapter for Lyft if the judge grants approval.
The settlement does not end the broader dispute for every ride hailing company facing similar claims. Uber still faces a lawsuit from the Labor Commissioner’s Office containing comparable allegations about the classification of drivers.
For Lyft, the agreement offers a path away from an extended courtroom fight while directing substantial funds toward resolving claims tied to past labor practices. The company’s filing framed the deal as a way to remove litigation costs and distractions while management concentrates on its business objectives.