Lyft Just Settled A Landmark Worker-Classification Lawsuit. Is Uber Next?
Lyft agreed to pay $272.5 million. Uber has fought California over the case for six years.
Uber has been fighting the state of California for six years over a worker misclassification lawsuit. Earlier this month, its closest competitor and co-defendant in the suit settled for an eye-popping amount of $272.5 million.
Out of the total settlement, $232 million will be divided among thousands of Lyft drivers who worked between 2016 and 2020 before California legally categorized rideshare drivers as independent contractors. The lawsuit claims that at the time, drivers were employees under California law and entitled to basic benefits like minimum wage and overtime pay. Lyft will have four years to pay out the suit.
This isn’t the first time rideshare companies have faced penalties for violating labor laws. New York state settled a wage-theft suit with Uber and Lyft in 2023 for $290 million and $38 million, respectively. The state claimed that the company unnecessarily took fees from drivers. In August, UberEats settled with Seattle’s Office of Labor Standards, paying out $4.4 million across 14,000 drivers who never received full payment for their work.
Uber and Lyft claim that classifying drivers as independent contractors is integral to their business model. They’ve defended this position vigorously in state legislatures. In 2020, just months after the California wage theft lawsuit was announced, Uber and other gig-work companies spent over $200 million to push California’s Proposition 22, the ballot initiative designating rideshare drivers as independent contractors. Similar legislation exists in North Carolina, Arkansas, Indiana, Florida and Ohio
“This settlement closes a chapter from a very different time, before Prop 22,” Lyft said in a statement. “The vast majority of rideshare drivers in California have always wanted to be independent contractors, and voters affirmed that when they passed Prop 22 in 2020.”
Rideshare companies argue that drivers aren’t employees because they are free to set their own schedules, choose the area they work in, and are not subject to non-compete agreements. In its yearly financial disclosure, Uber stated that classifying drivers could bring less drivers to the platform. Additional expenses like salary and benefits would be passed on to consumers as price increases.
California’s wage-theft lawsuit against Uber is ongoing.
On October 1, the day the lawsuit was announced Uber stock dropped by nearly 1%. Legal vulnerability has remained a persistent problem for Uber, eating into its bottom line. In last year’s third quarter earnings report the company said it lost $479 million resolving legal and regulatory concerns. The report caused its stock to drop 7%.
“Lyft coming to the table is an important step, but it doesn’t close the book on misclassification in the gig economy,” said San Diego City Attorney Heather Ferbert in a press release. “There is still a lot at stake for drivers, and my Office will keep fighting until every worker gets what they’ve earned.”
