Lyft Settles Driver Misclassification Lawsuit for $27 Million

Ride-hailing giant Lyft has agreed to pay $27 million to settle a class action lawsuit brought by thousands of its California drivers who alleged that they were misclassified as independent contractors instead of employees, depriving them of essential benefits and protections.

The settlement, announced on Wednesday, marks the latest in a series of legal challenges that have plagued Lyft and its main rival Uber, both of which have been under increasing pressure to reclassify their drivers as employees. Under California law, independent contractors are not entitled to receive minimum wage, overtime pay, or unemployment insurance, among other benefits.

The lawsuit, which was first filed in 2013, claimed that Lyft violated California labor law by failing to reimburse its drivers for expenses such as gas and car maintenance, and by not providing them with the same level of insurance coverage and occupational benefits as regular employees. The plaintiffs sought to recover unpaid wages, overtime, and other compensation for thousands of drivers who worked for Lyft between May 2012 and July 2016.

As part of the settlement, Lyft will pay $12.25 million in cash to the drivers, who will be classified as independent contractors under the terms of the agreement. The company will also provide additional benefits, such as increased transparency about passenger fare estimates and ride data, and will establish a dispute resolution process for drivers who have been deactivated or suspended from the platform.

Lyft has maintained that its drivers are independent contractors and not employees, arguing that they enjoy more flexibility and control over their work schedules and earnings. The company has also said that reclassifying its drivers as employees would fundamentally alter the nature of its business model and increase costs for both drivers and passengers.

However, the settlement may have broader implications for other gig economy companies, which have faced increasing scrutiny over the classification of their workers. Earlier this year, Uber agreed to pay $20 million to settle a similar lawsuit in California, and Postmates reached a $11.5 million settlement in 2019. The issue is likely to be a major point of contention in the ongoing debate over labor rights and protections in the US.

As part of the settlement agreement, both sides have also agreed to drop all claims and appeals related to the case, and to collaborate on efforts to improve the working conditions and benefits for ride-hailing drivers in California. The settlement awaits court approval and is expected to be finalized in the next few months.