Lyft has agreed to pay $272.5 million to settle claims that it misclassified its California drivers as independent contractors rather than employees, state and city officials announced on Thursday.
The settlement resolves allegations of wage theft covering the period from April 6, 2016, through Dec. 15, 2020, when drivers were denied minimum wage, overtime, paid sick leave and timely wage payments, according to the state attorney general’s office. Officials called it the largest settlement of its kind in state history.
Roughly 87 percent of the money, at least $237 million, is reserved for drivers, with individual payments based on the hours and miles each driver logged during the period, according to the settlement terms. The deal, which requires court approval, was brought by Attorney General Rob Bonta; the city attorneys of San Francisco, San Diego and Los Angeles; the state labor commissioner; and private plaintiffs.
The case stops where it does because of Proposition 22, the ballot measure organized primarily by Uber and Lyft that voters approved in November 2020. The law exempted ride-hailing companies from AB5, the 2019 statute that had made it harder to treat gig workers as contractors. Lyft is not required to reclassify its drivers or provide any relief for work after Dec. 15, 2020.
David Risher, Lyft’s chief executive, pointed to that vote in a statement provided to Ars Technica. “The vast majority of rideshare drivers in California have always wanted to be independent contractors,” he said, “and voters affirmed that when they passed Prop 22 in 2020, giving drivers new benefits and protections while preserving their flexibility.”
Mr. Risher said Lyft had gone beyond what the law requires, becoming what he called the only ride-hailing company with a fee cap. “Lyft believes drivers have always been properly classified under the law, and we’re glad to put this case behind us,” he said.
Veena Dubal, a law professor at the University of California, Irvine, and a longtime critic of Uber and Lyft, said the settlement should not be read as a straightforward victory. “While the state should be lauded for taking on these behemoth firms, this is a paltry sum compared to what drivers are owed,” she wrote in an email to Ars Technica. The unpaid wages “would have gone to rent and food for families,” she wrote, and paying back a fraction of what was owed to “thousands of low-income, mostly immigrant and racial-minority workers means that this system is not working the way it should.”
Drivers have kept organizing in the meantime. In August, the state labor board recognized the California Gig Workers Union, formed after Gov. Gavin Newsom signed a law last year allowing such a union to exist. How much each driver ultimately receives will be set after the settlement wins court approval.