Lyft to pay $272.5M in worker classification settlement

Ride-sharing company Lyft has agreed to pay $272.5 million to resolve a lawsuit brought by California over worker misclassification, California Attorney General Rob Bonta announced Thursday.

The case originated in May 2020 when California sued both Lyft and Uber for treating drivers as independent contractors rather than employees. The lawsuit followed the 2019 passage of Assembly Bill 5, which established the "ABC test"—a legal standard requiring businesses to prove workers are truly independent contractors. Under that framework, gig workers would have qualified as employees entitled to minimum wage and employment protections.

If approved by the court, Lyft's settlement allocates at least $237 million of the total toward compensating drivers for unpaid minimum wages and benefits they should have received. The compensation calculation will cover work performed between April 5, 2016, and December 15, 2020, based on hours and miles driven during that period.

The legal landscape shifted when voters approved Proposition 22 in November 2020, which created exceptions to the ABC test specifically for gig economy platforms. That measure reclassified Lyft and Uber drivers as contractors while providing certain benefits including healthcare subsidies. Despite legal challenges to Prop 22's validity, California's Supreme Court upheld the measure as recently as 2024.

Lyft's settlement resolves the state's claims against the company, marking a significant outcome for affected drivers. However, the lawsuit against Uber remains pending, leaving unresolved questions about whether the larger competitor will face similar financial obligations or reach its own settlement agreement.