Lyft to Pay $272.5 Million to Settle California Misclassification Case

Lyft will pay $272.5 million to settle allegations that it misclassified California drivers as independent contractors between 2016 and 2020 — the largest wage-and-hour settlement in the state's history — if a judge approves the agreement reached this month with state and city prosecutors.

The settlement involves California Attorney General Rob Bonta and the city attorneys of San Francisco, San Diego, and Los Angeles. It resolves claims that Lyft denied drivers wages and benefits they would have received as employees during the four-year window.

But the deal carries a glaring limitation. Lyft helped write the very labor rules at the center of the dispute. In 2020, the company and other gig firms spent $100 million lobbying for Proposition 22, which voters approved that November. The ballot measure let the companies keep treating drivers as independent contractors and barred misclassification claims filed after 2020.

How big is the gap between the settlement and what drivers originally sought?

Drivers filed roughly 5,400 wage claims against Uber and Lyft, totaling the hours, miles, and vehicle expenses they logged while driving. They calculated the two companies owed them $1.3 billion in aggregate. For Lyft alone, the claimed figure exceeded $434 million, according to Nicole Moore, president of Rideshare Drivers United.

The $272.5 million settlement falls well short of that mark. Moore called the gap enormous. "Lyft really owes drivers $20 billion for those four years," she said.

She estimates the deal could cover roughly 200,000 drivers, leaving individual payouts far below what claimants originally demanded. "It's a freaking absolute victory for drivers," Moore said. "This is a little bit of justice to get back what they stole from us."

She added that the settlement should have come sooner and the dollar figure should run far higher.

What does Lyft say about the deal?

Lyft maintains its drivers were always properly classified under California law. George Flynn, a company spokesperson, said in a statement: "If approved, this settlement closes a chapter from a very different time, before Prop 22. Lyft believes drivers have always been properly classified under the law, and we're glad to put this case behind us."

The settlement flows from a 2018 California Supreme Court ruling that tightened the test for treating workers as independent contractors. The state later codified that standard into law. Drivers responded by submitting thousands of wage claims, and California and three cities sued both Uber and Lyft in 2020.

What changes for drivers going forward?

Almost nothing, for now. Proposition 22 remains on the books. The settlement compensates drivers for the 2016 to 2020 period but does not alter the conditions under which they work today.

Moore and other activists aren't pausing. In June, drivers filed a separate lawsuit alleging Uber reneged on promises it made under Proposition 22. They argue the breach should invalidate the measure and restore California's stricter labor laws. "That absolutely continues on," Moore said. "We have to weaken Prop 22 in order to be able to really compensate drivers fairly."

A win in that case could open the door to compensation claims for wage theft and misclassification from 2020 forward.

The state's lawsuit against Uber has a court date scheduled for later next year. A settlement similar to Lyft's could land before then, though Uber also faces the active challenge from drivers over Prop 22.

Moore framed the Lyft deal as a step, not an endpoint. "The reason this is happening is because drivers kept this fight alive," she said, "and we will continue to keep this fight alive."

For Lyft, the settlement removes a multi-year legal overhang tied to pre-2020 operations. The company's core classification model remains untouched, leaving the broader labor fight in the courts and at the ballot box for years to come.