Lyft has agreed to pay $272.5 million to settle a lawsuit alleging the ride-hailing company wrongly classified its drivers as independent contractors rather than employees under California law. The company disclosed the agreement in a regulatory filing, saying it expects the deal to spare it the expense and disruption of drawn-out litigation. Lyft also said the settlement would let management keep its attention on running the business.
The case began in August 2020, when the California Labor Commissioner's Office sued Lyft over its driver classification practices. The lawsuit claimed Lyft treated drivers as contractors when state law at the time called for them to be employees. According to the allegations, drivers were denied minimum wage and overtime, along with benefits and protections given to employees, such as paid sick leave and prompt wage payments.
California Labor Commissioner Lilia García-Brower credited the drivers who raised the issue, saying the outcome was made possible by the workers who came forward. She said the Labor Commissioner's Office will give up its portion of the settlement and send that money to drivers who filed wage claims. The settlement still needs a judge's approval.
The agreement covers alleged violations between April 6, 2016 and December 15, 2020, a stretch when California was debating whether gig economy workers were contractors or employees. Drivers for app-based transportation services such as Lyft and Uber are now classified as contractors after voters approved Proposition 22 in 2020.
That ballot measure created an exception to Assembly Bill 5, a 2019 state law that required companies including DoorDash, Lyft and Uber to treat gig workers as employees, making them eligible for minimum wage, workers' compensation and other benefits. Even after AB 5 took effect, Lyft, Uber and other companies built around gig workers kept classifying their drivers as contractors.
That led to legal action from the Labor Commissioner's Office, the California Attorney General and the city attorneys of Los Angeles, San Diego and San Francisco, as well as private suits brought under California's Private Attorneys General Act. The cases were coordinated in San Francisco Superior Court in September 2021. The settlement ends this legal chapter for Lyft, while Uber still faces a Labor Commissioner's Office lawsuit with similar allegations.
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