Lyft will pay $272.5 million to resolve a lawsuit accusing the company of violating California labor laws by classifying drivers as independent contractors rather than employees. The settlement, disclosed in a regulatory filing, aims to end prolonged litigation and allow Lyft to focus on its business operations.
The lawsuit was initiated in August 2020 by the California Labor Commissioner’s Office (LCO), which claimed Lyft denied drivers employee rights such as minimum wage, overtime pay, paid sick leave, and timely wage payments. The case covers alleged violations between April 2016 and December 2020, a period when California was debating worker classification in the gig economy.
California’s Assembly Bill 5, enacted in 2019, required companies like Lyft to classify gig workers as employees, but Lyft and other ride-hailing firms continued to treat drivers as contractors. This led to multiple legal actions from state and city officials, as well as private lawsuits, which were consolidated in San Francisco Superior Court in 2021.
In 2020, voters passed Proposition 22, exempting app-based transportation companies from AB 5 and allowing drivers to remain independent contractors while receiving certain benefits. Lyft stated the settlement closes a chapter predating Prop 22 and emphasized that most drivers prefer contractor status for its flexibility. The company also highlighted that it has implemented a fee cap, exceeding Prop 22’s requirements.
California Labor Commissioner Lilia García-Brower credited the settlement to drivers who raised their concerns and noted that the LCO will redirect its portion of the settlement funds to drivers who filed wage claims. The settlement still requires judicial approval.
While this resolves Lyft’s legal challenges on this issue, Uber continues to face a similar lawsuit from the California Labor Commissioner’s Office.