Lyft has agreed to pay $272.5 million to resolve a lawsuit that accused the ride-hailing company of violating California law by classifying drivers as independent contractors instead of employees. According to a regulatory filing, the company stated that the settlement will help avoid the costs and distractions of prolonged litigation, allowing management to concentrate on business objectives.
Origins of the legal dispute
The case stems from an August 2020 lawsuit filed by the California Labor Commissioner’s Office. The filing alleged that Lyft treated drivers as independent contractors rather than employees, thereby denying them minimum wage, overtime, paid sick leave, timely wage payments, and other statutory benefits.
California Labor Commissioner Lilia García-Brower stated that the outcome belongs to the workers who spoke up, adding that the Labor Commissioner’s Office will forgo its portion of the settlement to direct funds straight to drivers who filed wage claims. The agreement requires approval from a judge and covers alleged violations between April 6, 2016, and December 15, 2020.
Evolution of gig worker classification
The covered timeframe spans a period when California debated whether gig economy workers should be categorized as independent contractors or employees. State lawmakers previously passed Assembly Bill 5 in 2019, requiring companies such as DoorDash, Lyft, and Uber to treat gig workers as employees.
Despite the legislation, ride-hailing companies continued using independent contractor classifications, prompting legal action from the Labor Commissioner’s Office, the California Attorney General, city attorneys from Los Angeles, San Diego, and San Francisco, and private actions under the Private Attorneys General Act. These cases were coordinated in San Francisco Superior Court in September 2021.
Today, drivers for app-based transportation services in California are classified as contractors following the passage of Proposition 22 by voters in 2020. While the settlement closes the chapter for Lyft, Uber continues to face a similar lawsuit from the Labor Commissioner’s Office.
