Lyft to Pay $272.5 Million Over California Driver Misclassification

Lyft has agreed to pay $272.5 million to settle a lawsuit accusing the ride-hailing company of violating California law by misclassifying drivers as independent contractors instead of employees. The company disclosed the figure in a regulatory filing, and the deal still requires a judge's approval.

In the filing, Lyft said it believes the settlement will allow it to avoid the "costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives." The company could not be reached for further comment.

The case began in August 2020, when the California Labor Commissioner's Office sued Lyft for treating drivers as independent contractors rather than employees, as state law required at the time. The suit alleged that drivers were denied minimum wage and overtime, along with other benefits and protections provided to employees, including paid sick leave and timely wage payments.

The settlement covers alleged violations from April 6, 2016 to December 15, 2020 — a period when California was actively debating whether workers in the booming gig economy were independent contractors or employees.

California Labor Commissioner Lilia García-Brower framed the outcome around the drivers themselves. "This settlement is about the workers who came forward and spoke up. Their voices made this outcome possible," she said in a statement. She added that the LCO will forgo its share of the settlement and direct those funds to drivers who filed wage claims.

The roots of the dispute stretch back to Assembly Bill 5, a state law passed in 2019 that required companies like DoorDash, Lyft and Uber to classify gig workers as employees, entitling them to minimum wage, workers' compensation and other benefits. Even after AB 5 took effect, Lyft, Uber and other companies that relied on gig workers continued to classify their drivers as contractors.

That stance triggered legal action from multiple fronts. The LCO, the California Attorney General and the City Attorneys of Los Angeles, San Diego and San Francisco all filed cases, alongside private actions brought under California's Private Attorneys General Act. The courts coordinated the cases in San Francisco Superior Court in September 2021.

The legal ground shifted again in November 2020, when California voters passed Proposition 22. The ballot measure created a carve-out from AB 5, and today drivers for app-based transportation services like Lyft and Uber are classified as contractors.

For Lyft, the settlement closes this legal chapter. Uber does not get the same relief: the company still faces an LCO lawsuit making similar allegations, meaning the $272.5 million payment may mark the price of closure for Lyft but not the end of California's misclassification battles for the gig economy at large.