Lyft agrees to pay $272.5 million to settle California driver misclassification lawsuit

Lyft has agreed to pay $272.5 million to settle a lawsuit accusing it of misclassifying drivers as independent contractors, California Attorney General Rob Bonta and the city attorneys of San Francisco, San Diego and Los Angeles announced on Thursday. The settlement, which still needs court approval, covers only Lyft; the state's case against Uber continues.

At least $237,075,000 of the total is reserved for repaying drivers the minimum wage and benefits they were owed. According to the attorney general's statement, driver eligibility and compensation will be based on the hours and miles driven between April 5, 2016 and December 15, 2020.

How the case began

The lawsuit dates back to May 2020, when then-Attorney General Xavier Becerra sued both Uber and Lyft, arguing the companies had evaded state law by declaring their drivers were not employees. It followed the 2019 passage of Assembly Bill 5, which codified the so-called "ABC test" that businesses must use to prove a worker is genuinely an independent contractor. Because the law threatened the business model of ride-hailing platforms, Uber and Lyft backed Proposition 22, the November 2020 ballot measure that exempted gig workers from the ABC test while guaranteeing benefits such as healthcare subsidies. California's Supreme Court upheld Prop 22 in 2024, which is why the Lyft settlement covers only the 2016-2020 period.

What both sides say

Bonta called the deal a "landmark win for workers" and the largest misclassification settlement in California's history, saying ride-hailing companies "have enjoyed massive growth and profits on the backs of drivers over the past decade," many of whom come from immigrant communities and communities of color. Los Angeles City Attorney Hydee Feldstein Soto said misclassifying workers denies them critical protections and shifts the burden onto taxpayers, and that the settlement "sends a clear message" that companies must follow the law.

Lyft CEO David Risher said in a statement to Ars Technica that the vast majority of California rideshare drivers have always wanted to be independent contractors, and that voters affirmed this by passing Prop 22 in 2020. He added that Lyft has gone further than Prop 22 requires, becoming the only rideshare company with a fee cap, and that the company is glad to put the case behind it.

Not everyone views the settlement as a win for drivers. Veena Dubal, a law professor at the University of California, Irvine, told Ars Technica it is "a paltry sum compared to what drivers are owed," noting that the money would have gone to rent and food for families. The deal also comes amid continued organizing: in August, California's labor board recognized the new California Gig Workers Union, formed after Governor Gavin Newsom signed a law allowing it.

Sources: Engadget · Ars Technica