Lyft agrees to pay $272.5M to settle California's claims that Lyft mislabeled drivers as independent contractors rather than employees between 2016 and 2020

Drivers in California are now guaranteed employment protections and benefits previously denied.

Lyft has agreed to pay $272.5 million to settle a lawsuit brought by the California Labor Commissioner's Office. The lawsuit accused Lyft of violating California law by misclassifying its drivers as independent contractors instead of employees between April 6, 2016, and December 15, 2020. The settlement aims to avoid the costs and distractions of prolonged litigation. The California Labor Commissioner's Office will direct its share of the settlement funds to drivers who filed wage claims. This period predates California voters' passage of Proposition 22 in 2020, which allowed app-based transportation drivers to be classified as contractors and established new benefits and protections for them, effectively creating a carve-out from Assembly Bill 5. Despite AB 5, companies like Lyft continued to classify drivers as contractors, leading to legal action. Lyft maintains that its drivers were always properly classified under the law and views this settlement as closing a chapter from a different legal era.

The settlement signals a continued legal reckoning for gig economy companies operating in California, even as subsequent legislation like Prop 22 has altered the landscape for current workers. This resolution addresses a specific historical period where the state aggressively challenged the contractor classification, impacting companies that benefited from that model before legislative changes provided alternative frameworks. It underscores the significant financial penalties and legal entanglements that can arise from worker classification disputes.

This outcome may embolden other states or labor advocates to pursue similar claims against companies that operated under similar classification models during that timeframe. For Lyft, it represents a substantial financial closure on a major legal liability, allowing a reallocation of resources and management focus towards ongoing business operations and driver relations under the current regulatory environment, which includes the provisions established by Prop 22.