Lyft agrees to $272.5M settlement over California driver classification

Lyft Inc. agreed Thursday to pay $272.5 million to resolve allegations that it misclassified California drivers as independent contractors, a deal officials called the largest wage-and-hour settlement in state history.

The proposed settlement ends claims by Attorney General Rob Bonta and the city attorneys of San Francisco, San Diego and Los Angeles that Lyft violated state labor and unfair competition laws from 2016 to 2020. At least $237.075 million, or 87%, is reserved for drivers.

"This is the largest wage and hour settlement in California history, reflecting both the seriousness of the harm and our unwavering commitment to stand up for workers across California," San Francisco City Attorney David Chiu said.

Driver payments will be based on hours and miles driven from April 2016 through Dec. 15, 2020. The total could rise if Lyft pays in installments and owes interest. A third-party administrator will contact eligible drivers after court approval.

Officials accused Lyft of denying drivers minimum wage, overtime, expense reimbursement and other employment protections. The Labor Commissioner's Office stated it will forgo its $5.45 million share of penalties so more money reaches more than 1,600 drivers who filed wage claims; those claimants will also receive enhanced mileage calculations.

Attorney General Rob Bonta called the deal a "landmark win for workers" and "the largest misclassification settlement in California's history," saying rideshare companies such as Lyft had "enjoyed massive growth and profits on the backs of drivers over the past decade, many who are from immigrant communities and communities of color."

"Lyft's success would not be possible without the drivers who Lyft sought to unfairly short-change," Bonta said. "Hard-working employees deserve full compensation for their labor. We have not and will not stand by when companies attempt to shirk their legal responsibilities and deprive employees of their wages and benefits as required under California law."

The case followed the "ABC test" for worker classification adopted in 2018 in Dynamex Operations West Inc. v. Superior Court and later codified by Assembly Bill 5. Proposition 22 created a separate framework for qualifying app-based drivers in 2020, after the period covered by the settlement, so Lyft is not required to reclassify drivers or provide relief for later work.

In a statement, Lyft spokesman George Flynn said that if the court approves the settlement, it closes a chapter from a "very different time, before Prop. 22."

"The vast majority of rideshare drivers in California have always wanted to be independent contractors, and voters affirmed that when they passed Prop 22 in 2020, giving drivers new benefits and protections while preserving their flexibility. And since then, Lyft has gone further than Prop 22 requires, becoming the only rideshare company with a fee cap," Flynn wrote. "Lyft believes drivers have always been properly classified under the law, and we're glad to put this case behind us. We remain laser focused on helping create more earnings for drivers and more affordable rides for riders."

The plaintiffs will continue litigating against Uber, the remaining defendant, in Uber Technologies Wage and Hour Cases, CJC-21-005179, (S.F. Super., Ct., filed Sept. 16, 2021)