Lyft agrees to pay $272.5 million to settle worker classification lawsuit
Uber and Lyft were sued by the state of California in 2020 for misclassifying employees as contractors.
Lyft will pay $272.5 million to settle a May 2020 lawsuit alleging that it and Uber misclassified employees as contractors, California Attorney General Rob Bonta announced in a statement Thursday. The lawsuit was filed following the passage of Assembly Bill 5, which classified gig workers as employees, but before the reclassification introduced by the passage of Proposition 22.
If the settlement is approved by the court, Lyft will pay $272.5 million in penalties, of which at least $237,075,000 will be earmarked to reimburse workers for the minimum wage and benefits they are owed. “Eligibility and compensation for drivers will be based on the number of hours and kilometers traveled between April 5, 2016 and December 15, 2020,” the statement said.
The passage of Assembly Bill 5 in 2019 codified into law what’s known as the “ABC test,” criteria that businesses must use to prove their workers are independent contractors rather than employees. The bill’s original language allowed Lyft and Uber drivers to be classified as employees entitled to minimum wage and other protections. Because the classification threatened the business model of gig workers like Lyft and Uber, both companies supported Proposition 22 in November 2020. The ballot measure created exclusions from the ABC test that reclassified gig workers as contractors, while still guaranteeing them certain benefits like healthcare subsidies.
Workers challenged the legality of Proposition 22, but the law was upheld by the California Supreme Court as recently as 2024. Although Lyft’s settlement resolves the state’s claims against the company and is a significant victory for gig workers, Uber’s part in the lawsuit remains up in the air.
