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Lyft is paying $272.5M to settle lawsuit over how it classified drivers
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Lyft has agreed to pay $272.5 million to settle a California lawsuit alleging that the ride-hailing company misclassified drivers as independent contractors rather than employees. The settlement, disclosed in a regulatory filing, still requires approval by a judge. It covers alleged violations between April 6, 2016, and December 15, 2020. Lyft said the agreement would help avoid the costs and distraction of protracted litigation while allowing management to focus on business objectives.
The case was filed by the California Labor Commissioner’s Office in August 2020. The agency argued that Lyft violated state law by treating drivers as contractors even though they should have been classified as employees under the framework then in effect. The lawsuit alleged that drivers were denied minimum wages, overtime, paid sick leave, timely payment of wages and other benefits available to employees. The settlement therefore addresses both the legal status of Lyft drivers and the financial consequences of the classification dispute.
California Labor Commissioner Lilia García-Brower said the settlement was about workers who came forward and spoke up, adding that the Labor Commissioner’s Office would forgo its share and direct those funds to drivers who filed wage claims. The settlement follows broader litigation involving the California Attorney General and city attorneys from Los Angeles, San Diego and San Francisco, along with private actions under the state’s Private Attorneys General Act. Those matters were coordinated in San Francisco Superior Court in September 2021.
The dispute reflects a changing California labor-law environment for app-based transportation workers. In 2019, Assembly Bill 5 sought to classify many gig workers as employees, providing access to minimum wage, workers’ compensation and other benefits. Voters approved Proposition 22 in 2020, creating a carve-out that allowed app-based transportation companies to continue using contractor classification while establishing additional benefits and protections. The covered period in Lyft’s settlement ends in December 2020, shortly after voters passed the measure.
A Lyft spokesperson said the settlement closes a chapter from a period before Proposition 22 and that the company believes drivers were properly classified under applicable law. The company also said it had gone beyond the measure’s requirements by introducing a fee cap. The settlement does not end broader scrutiny of contractor classification in the gig economy: the source notes that the Lyft agreement is separate from an ongoing Labor Commissioner lawsuit involving similar allegations against Uber. If approved, the deal would provide financial relief to drivers who submitted wage claims while setting a significant benchmark for other California gig-economy litigation.
The agreement remains subject to judicial approval, and its final financial and operational effects will depend on that approval and the distribution of funds. It also leaves unresolved broader policy questions about worker protections, benefit portability and the balance between contractor flexibility and employment standards. The case may influence future lawsuits, regulatory negotiations and legislative proposals concerning app-based drivers, even as California continues to operate under the contractor framework created by Proposition 22.
