California secures $272.5m Lyft settlement over driver classification claims
California has agreed a $272.5 million settlement with Lyft over allegations that it misclassified drivers as independent contractors and withheld employee protections from 2016 to 2020. Officials describe it as the largest misclassification settlement in the state’s history, while a workers’ rights critic says the payment falls far short of what drivers are owed.
The case began in 2020, when California sued both Lyft and Uber under a state law requiring a three-part test for classifying workers. The settlement covers only Lyft and ends claims from the period before voters approved Proposition 22 in November 2020, which exempted ride-hailing companies from that law; the case against Uber continues. Lyft says drivers wanted to remain independent contractors, while California’s Gig Workers Union was recognised by the state labour board in August.
- Lyft will pay California $272.5 million over driver classification claims.
- The settlement covers alleged misclassification from 2016 to 2020.
- The case against Uber continues, and critics say drivers are owed more.
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Ride-hailing companies like Lyft classify their drivers as independent contractors rather than employees. This classification denies drivers employee benefits such as paid leave, sick pay, or minimum wage protections. California argues that drivers should be classified as employees and receive these protections.
The dispute stems from a California law setting out rules for worker classification. Both Lyft and Uber were sued under this law in 2020. However, voters approved Proposition 22, which exempted ride-hailing companies from that law.
The classification question matters because it determines what protections and benefits workers receive. As ride-hailing and app-based services have grown, how to classify these workers has become increasingly important. The outcome of such cases affects not just individual companies but sets precedent for other industries.
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The case for
The settlement represents a significant acknowledgement of misclassification concerns and constitutes the largest such settlement in California's history, providing substantial compensation to affected drivers. Lyft has long maintained that drivers themselves preferred independent contractor status for the flexibility it afforded, allowing them to set their own schedules and work arrangements. The legal landscape surrounding gig work classification was genuinely uncertain during the 2016–2020 period, and Lyft's approach aligned with widespread industry practice at that time.
The case against
The settlement amount falls far short of the cumulative value of withheld employee protections—health insurance, unemployment insurance, workers' compensation, paid leave—that drivers were entitled to during their years working for Lyft as the company grew substantially profitable. The notion that drivers freely 'preferred' independent status glosses over their constrained bargaining position and lack of meaningful alternatives. The monetary settlement cannot adequately compensate for the genuine financial security and dignity that proper employment classification would have provided.
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Originally published by Ars Technica as “Lyft settles landmark driver misclassification lawsuit for $272.5M”.