Lyft to Pay $272.5M Settlement Over Driver Classification Dispute

Ride-hailing company Lyft has agreed to pay $272.5 million to resolve a lawsuit accusing it of violating California labor law by treating drivers as independent contractors rather than employees. In a regulatory filing, Lyft said the settlement would help it avoid prolonged litigation costs and allow management to stay focused on business goals. The company did not respond to a request for comment.

Origins of the case

The dispute traces back to a lawsuit filed in August 2020 by California's Labor Commissioner's Office, which alleged that Lyft's contractor classification denied drivers minimum wage, overtime pay, paid sick leave, and timely wage payments — protections normally guaranteed to employees. Labor Commissioner Lilia García-Brower said the settlement was made possible by drivers who came forward to report violations, and that her office would forgo its share of the funds so they could go directly to drivers who filed wage claims.

Timeline and broader context

The settlement covers alleged violations between April 6, 2016, and December 15, 2020, a period when California was actively debating whether gig economy workers should be classified as contractors or employees. Today, Lyft and Uber drivers remain classified as contractors following the 2020 passage of Proposition 22, a ballot measure that carved out an exemption from Assembly Bill 5 — a 2019 state law that had required gig companies like DoorDash, Lyft, and Uber to classify workers as employees. Even after AB 5 took effect, these companies kept classifying drivers as contractors, prompting legal action from multiple California authorities, which was consolidated in San Francisco Superior Court in 2021. The settlement still needs judicial approval. Uber continues to face a similar lawsuit from the Labor Commissioner's Office.