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Lyft agrees to pay $272.5 million for California driver claims from 2016 to 2020
Lyft agreed to pay $272.5 million to settle California claims that it misclassified drivers as contractors from 2016 to 2020. The covered window closed in 2020, the year voters carved rideshare drivers out of AB5, so the platforms with the most to learn from it are the ones whose workers still fall under AB5's test.
The Product Desk · Product desk
What happened
- The settlement still needs a judge's approval and covers alleged violations from April 6, 2016 to December 15, 2020.
- The suit alleged drivers were denied minimum wage, overtime, paid sick leave and timely wage payments.
- Lyft, Uber and other gig companies kept classifying drivers as contractors even after AB5 took effect.
- State, city and private cases, including actions under the Private Attorneys General Act, were coordinated in San Francisco Superior Court in September 2021.
- Uber still faces a California Labor Commissioner lawsuit that makes similar allegations.
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Why it matters
- constraint The published terms do not include a driver count or per-driver amount, so a finance team cannot turn the $272.5 million into a per-worker reserve for its own headcount.
- precedent Uber's pending Labor Commissioner case now sits beside a public $272.5 million settlement by a rival facing similar allegations.
- cost Lyft's current California drivers are contractors under Prop 22, so this charge pays for past conduct in a window that has already closed.
Lyft's announcement offers $272.5 million [1] and two superlatives that differ slightly. Attorney General Rob Bonta called it "the largest misclassification settlement in California's history" [2]. San Francisco City Attorney David Chiu said, "This is the largest wage and hour settlement in California history" [3].
Set the superlatives aside and the money pays for a closed stretch of time, about 56 months [1]. Spread evenly, it comes to roughly $4.8 million a month [2]. Bonta said the deal "will put money back in the pockets of thousands of drivers" [14].
The window ends in the year the law changed for rideshare. The California Supreme Court adopted the ABC test in its 2018 Dynamex decision, and AB5 wrote it into statute [8]. AB5, passed in 2019, required companies such as Lyft to classify gig workers as employees [7]. In 2020 voters passed Proposition 22, a carve-out from AB5. Under it, app-based transportation drivers are classified as contractors today [6].
The announcement pitches a state record. The terms pay drivers, with the Labor Commissioner's share going to the drivers who filed wage claims [11]. Labor Commissioner Lilia Garcia-Brower said, "This settlement is about the workers who came forward and spoke up. Their voices made this outcome possible" [16]. Lyft's own description is about management time. Its regulatory filing said the settlement lets it avoid the "costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives" [9].
San Diego City Attorney Heather Ferbert said, "Lyft coming to the table is an important step, but it doesn't close the book on misclassification in the gig economy" [13]. For a platform working out what the figure means for its own plan, I'd sort on two facts about its California workers. One is whether they sit inside a carve-out like Prop 22 today. The other is whether the company called them contractors during a period when no carve-out covered them.
- Inside a carve-out now, contractors before it existed: this is Lyft's position, and Uber's [6][15]. The exposure is a fixed past window, and the decision is how much to reserve. - Inside now, no contractor history before it: the Lyft figure is background for the legal team. - Outside any carve-out, contractors throughout: Lyft's settled window has an end date [4], while exposure for a platform in this row keeps running under the ABC test [8]. - Outside any carve-out, no history yet: the classification choice is still ahead, and the ABC test applies to whatever model gets built [8].
For the bottom two rows, I'd leave the Lyft number out of the budget and treat classification as a current operating decision. The tradeoff is that finance gives up the one public figure it could point to and holds an open question instead.
What to watch
- Whether the court approves the settlement, and whether the approved terms disclose a driver count or per-driver payments.
- How the Labor Commissioner's similar lawsuit against Uber resolves, and for how much.