Lyft settles landmark driver misclassification lawsuit for $272.5M

Lyft has agreed to pay $272.5 million to settle a lawsuit over how it classified its California drivers. The case covers the period from 2016 to 2020, when the company treated drivers as independent contractors rather than employees.

The settlement's timeframe is tied to Proposition 22, a ballot measure approved by California voters in November 2020 that was organized primarily by Uber and Lyft. The measure gave ride-hailing companies an exemption from AB5, the state law that would otherwise have required reclassifying drivers as employees—explaining why the settlement only addresses the period before Prop 22 took effect.

Company's position

In a statement to Ars Technica, Lyft CEO David Risher said most California rideshare drivers have always preferred to work as independent contractors, a preference he said voters affirmed by passing Prop 22 in 2020. He noted that Lyft has since gone further than Prop 22 requires, becoming the only rideshare company with a fee cap. Risher maintained that Lyft believes its drivers have always been properly classified under the law and said the company is glad to resolve the case.

Criticism from labor experts

Veena Dubal, a law professor at the University of California, Irvine and a longtime critic of Uber and Lyft, cautioned against viewing the settlement as a clear win for drivers. She argued the sum is paltry compared to what drivers are actually owed, money that would otherwise have gone toward rent and food for their families. Dubal said the fact that the company only has to pay a small fraction of what's owed to thousands of low-income workers, many of them immigrants and racial minorities, shows the system isn't functioning as it should.

Workers have continued organizing for better pay and conditions. In August, California's labor board recognized the newly formed California Gig Workers Union, created after Gov. Gavin Newsom signed a law last year permitting such unions.