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Lyft must pay $272.5 million in a historic settlement with the state of California and three cities over allegations that the company misclassified its drivers before it helped write a law that allowed it to consider them independent contractors.
Thousands of drivers who drove for the ride-hailing company from 2016 to 2020 are entitled to employee benefits such as minimum wage, overtime and reimbursement for work-related expenses, California Attorney General Rob Bonta said Thursday at a press conference in San Francisco. The drivers will split at least $237 million, which is the largest misclassification settlement in state history, he said.
“Make no mistake, misclassification is how companies cheat workers,” the attorney general said, standing with the city attorneys and staff of San Francisco, San Diego and Los Angeles, who worked on the case for six years. Their lawsuits were consolidated in San Francisco Superior Court with those of the state Labor Commissioner’s Office and two individual drivers. “That’s not a business model, that’s exploitation,” Bonta said.
The state and cities also sued Uber over misclassification and wage theft. Both companies have been fighting the lawsuits for years and asked the state and U.S. supreme courts for review. Both high courts refused to review the cases.
“Lyft is only part of the picture,” said San Diego City Attorney Heather Ferbert at the press conference. “Uber has a larger share of the rideshare market, and that means more drivers, more miles driven and more affected workers. So our job is not done.”
Ferbert told CalMatters afterward that “if Uber doesn’t want to come to the table and talk about a meaningful settlement,” the case against the company could go to trial.
In 2020, Lyft, Uber and other gig-economy companies headquartered in California spent $205 million on Proposition 22, a ballot initiative that 58% of the state’s voters approved. It exempted the companies from state labor law and allowed them to treat drivers and delivery workers as independent contractors instead of employees.
“This settlement closes a chapter from a very different time, before Prop. 22,” said George Flynn, a Lyft spokesperson.
But drivers and other gig workers have complained about many of the same issues since Prop. 22 was passed. CalMatters found that effectively, nobody is in charge of upholding the promises gig companies made under the law, such as guaranteed wages, some healthcare benefits and a way to fight against “deactivations,” or being kicked off the apps.
This year, Uber drivers sued the company, accusing it of failing to create a system that allows them to appeal deactivations. Also this year, ride-hailing drivers formed a union after winning the right to collectively bargain last year.
Rideshare Drivers United, a Los Angeles-based group whose members filed the initial 5,000 claims with the state on behalf of Lyft and Uber drivers, said the settlement falls short of the $434 million in claims it filed on behalf of about 1,900 Lyft drivers.
“Yes, we are getting some of the money back because we fought for it, but why do they not have to pay basic minimum wages and expenses like every other company?” said Nicole Moore, president of the group, in a statement. “Are we OK with letting these companies cheat a system of the most basic labor rights?”
California Labor Commissioner Lilia García-Brower said in a statement that her office is forgoing its part of the settlement, $5.45 million, “so that every available dollar goes directly to drivers who filed wage claims.” Her office said more than 1,600 Lyft drivers filed the claims; the settlement will apply to any eligible Lyft drivers so the exact number of potential claims is unknown.
A settlement administrator will manage the fund that will be doled out to drivers, who will be eligible for compensation based on the number of miles and hours they drove for Lyft between April 2016 and December 2020. The administrator will contact drivers once the San Francisco Superior Court approves the settlement and Lyft begins making payments to the fund.
In a filing with the Securities and Exchange Commission, Lyft said it can choose to make settlement payments over four years.
An Uber spokesperson did not return CalMatters’ request to comment on its pending case or the comments the officials made about their ongoing litigation against the company — including Bonta saying that Uber was “a major violator” when it came to misclassification.
