Lyft to Pay $272.5 Million to Settle California Driver Misclassification Lawsuit

Settlement Reached in Misclassification Case

Lyft has agreed to pay $272.5 million to resolve a lawsuit that accused the company of violating California law by misclassifying its drivers as independent contractors instead of employees. The company stated that this settlement will help it avoid the costs and distractions of prolonged litigation, allowing management to focus on business objectives.

Background of the Lawsuit

The lawsuit was initiated by the California Labor Commissioner’s Office (LCO) in August 2020. It alleged that Lyft denied drivers minimum wage, overtime, paid sick leave, and timely wage payments, which are benefits typically provided to employees under state law at the time. The LCO will forgo its share of the settlement, directing those funds to drivers who filed wage claims.

Period Covered and Legal Context

The settlement addresses alleged violations that occurred between April 6, 2016, and December 15, 2020. This period predates the passage of Proposition 22 in 2020, which reclassified drivers for app-based transportation services like Lyft and Uber as contractors. Prior to Proposition 22, Assembly Bill 5 (AB 5), passed in 2019, required companies to classify gig workers as employees.

Impact of AB 5 and Subsequent Actions

Despite AB 5 taking effect, Lyft, Uber, and other gig economy companies continued to classify their drivers as contractors. This led to legal actions from the LCO, the California Attorney General, and city attorneys from Los Angeles, San Diego, and San Francisco, as well as private actions. These cases were coordinated in San Francisco Superior Court in September 2021. The settlement, if approved by a judge, closes a chapter from a time before Proposition 22.