CALIFORNIA — Lyft will pay $272,500,000 to settle allegations it misclassified drivers as independent contractors. At least $237,075,000 of the settlement is reserved for drivers. The settlement resolves allegations that Lyft committed wage theft by misclassifying drivers as independent contractors rather than employees between 2016 and 2020.

Timeline

California Attorney General Rob Bonta, the City Attorneys of San Francisco, San Diego, and Los Angeles, the California Labor Commissioner's Office, and private plaintiffs represented by Outten & Golden LLP, Olivier & Schreiber PC, and Lichten & Liss-Riordan P.C. worked to achieve the settlement. We are proud to announce this win for workers, the largest misclassification settlement in California’s history, said Attorney General Rob Bonta.

"Los Angeles and our statewide partners will not allow businesses to exploit their workers and evade their obligations under the law," said Los Angeles City Attorney Hydee Feldstein Soto. "This is what's possible when state and local prosecutors stand together for workers," said San Diego City Attorney Heather Ferbert. "This settlement is about the workers who came forward and spoke up," said California Labor Commissioner Lilia García-Brower.

What's New

The official record states that Lyft will pay $272.5 million, plus any accrued interest, to resolve allegations that it misclassified California drivers as independent contractors, denying them wage and workplace protections required under state law. In 2020, the California Supreme Court ruled in favor of Proposition 22, which allowed gig companies like Lyft to classify drivers as independent contractors despite the ABC test, creating legal uncertainty that influenced the timing and scope of this settlement. The California Labor Commissioner's Office had previously filed lawsuits against Uber and Lyft in 2018 for systemic wage theft, establishing a legal precedent for enforcing the ABC test for worker classification under California Labor Code. Primary source: dir.ca.gov

The California Employment Development Department (EDD) reported that over 5,000 Uber and Lyft drivers filed wage claims with the Labor Commissioner’s Office between 2018 and 2020, showing the scale of misclassification issues in the gig economy. San Francisco City Attorney David Chiu's office was involved in a 2023 Court of Appeal decision that upheld the lawsuit against Lyft, affirming that the People of California are not bound by individual driver arbitration agreements. San Francisco City Attorney Chiu previously led the city's efforts in a 2019 lawsuit against Uber and Lyft for misclassifying drivers, which laid the groundwork for similar actions taken in this case. Primary sources: oag.ca.gov, dir.ca.gov, dir.ca.gov (2)

The California Employment Development Department reported that over 40,000 gig workers in California were misclassified as independent contractors between 2016 and 2020, contributing to an estimated $1.2 billion in lost wages during that period. The California Labor Commissioner's Office has historically pursued wage theft cases against gig companies, with over $1 billion in settlements recovered from Uber and Lyft between 2018 and 2023 for misclassification violations. Primary source: dir.ca.gov

Why It Matters

The settlement addresses a period when the California Employment Development Department reported that over 40,000 gig workers in California were misclassified as independent contractors between 2016 and 2020, contributing to an estimated $1.2 billion in lost wages during that period.

This resolution follows years of legal action, including a 2019 lawsuit led by San Francisco City Attorney Chiu against Uber and Lyft for misclassifying drivers, which laid the groundwork for similar actions taken in this case. The lawsuit followed the introduction of the “ABC test,” a legal test used to analyze the misclassification of workers, which was first adopted by the California Supreme Court in 2018 in Dynamex Operations West, Inc. v. Superior Court and then codified into law under AB5. Proposition 22 altered how the ABC test is applied to certain app-based drivers during the litigation.