Lyft reached a settlement agreement with the state of California on Thursday resolving allegations that the company improperly classified drivers as independent contractors to avoid providing employee benefits and protections. The $272.5 million agreement, pending court approval, represents the largest wage theft settlement in California’s history according to state Attorney General Rob Bonta.
The dispute centers on driver classification in the rideshare industry, a contentious issue in California for over a decade. As independent contractors, Lyft drivers do not receive benefits such as health insurance, paid sick days, social security contributions, or overtime pay. Additionally, federal and state minimum wage laws and other labor protections do not apply to independent contractors under current law.
California’s original lawsuit against Lyft commenced in 2020, with Los Angeles, San Francisco, and San Diego subsequently joining the action. Multiple claims brought on behalf of thousands of Lyft drivers were later consolidated into the case. Over $237 million from the settlement will be distributed to the affected drivers. Lyft stated that drivers were always properly classified according to applicable law and expressed satisfaction with resolving the matter.
During litigation, Lyft joined Uber and other gig economy companies in supporting Proposition 22, a ballot measure designed to exempt ride-share drivers from California labor law protections. The measure passed in November 2020 and prompted several appeals in the case. The California labor commissioner indicated that driver voices and willingness to participate in legal action contributed to achieving the settlement terms.
A comparable lawsuit against Uber continues pending. In 2023, both Uber and Lyft jointly agreed to pay $328 million to settle similar wage theft claims brought by New York’s attorney general.
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