Skip to main content

Lyft settles lawsuit for $12.5M but drivers still aren’t ’employees’

lyft self driving cars california glowstache
Ride-hailing service Lyft this week agreed to pay $12.5 million in compensation and benefits to settle a lawsuit brought against it by its California-based drivers.

While the court judgment results in payouts of various amounts for the drivers depending on hours worked, it also means Lyft can continue to classify them as independent contractors rather than full-fledged employees.

Related Videos

Such a distinction is important for Lyft. A ruling demanding it treats its drivers as employees would’ve forced it to incur huge costs for things like Social Security, unemployment insurance, and workers’ compensation, as well as car-related expenses such as gas, insurance, and vehicle repairs.

However, it didn’t all go Lyft’s way. Besides the multi-million-dollar payout, the company has also agreed to a number of changes to its terms of service in order to clearly comply with existing state law. For example, it can no longer expel drivers from its service without warning, and must now take care of arbitration costs in employment-related disputes brought by drivers against the company.

Representing the Lyft drivers who brought the suit, attorney Shannon Liss-Riordan said that although the settlement fell short of its aim to reclassify the drivers as employees, it nevertheless achieved some “significant” changes that will benefit the drivers.

Lyft representative Kristin Riordan said in a statement, “We are pleased to have resolved this matter on terms that preserve the flexibility of drivers to control when, where and for how long they drive on the platform and enable consumers to continue benefiting from safe, affordable transportation.”

Uber, Lyft’s main rival in the ride-hailing space, will have been following Lyft’s case with great interest, as it too is facing similar court action from its own drivers, also in California. The case is currently making its way through the court system and will go before a jury on June 20.

The classification of drivers as independent contractors has been an important factor in the rapid growth of companies like Lyft and Uber, with the existing system enabling them to make big savings for subsequent investment. It’s also of great importance to the entire “sharing economy” model, which will likely suffer if legal challenges, such as the one currently facing Uber, go against it.

Editors' Recommendations

Uber says drivers aren’t an essential part of its business
Uber Chief Legal Officer Tony West

Uber’s top lawyer said it would not comply with a California bill that would force it to treat its contract drivers as employees, claiming that drivers are not a core part of the company’s business.

Speaking on a conference call on Wednesday, Uber chief legal officer Tony West pushed back against the newly passed Assembly Bill 5 (AB5), which will require app-based companies in the gig economy to reclassify their workers as regular employees.

Read more
Uber drivers could soon be considered Uber employees, and that could get expensive
uber suspend accounts coronavirus beacon color coded ride icon

Uber drivers may finally be recognized as official Uber employees -- and that could be uber-costly.

Officials in New York have ultimately ruled in favor of three former Uber drivers who filed a federal complaint against the transportation giant when their unemployment insurance claims were not accepted. This led to a two-year standoff that has called into question exactly how Uber classifies its extensive army of drivers. This week the New York State Unemployment Insurance Appeal Board  decided that drivers can be classified as employees. Alas, the ruling does not apply to the three original plaintiffs, only to other "similarly situated" drivers.

Read more
Facebook says job ads that target by age aren’t (necessarily) discriminatory
Crisis Response Hub

Facebook’s ad-targeting demographics are once again facing criticism -- this time, for discrimination based on age. ProPublica and The New York Times released a report on Wednesday, December 20, revealing a number of employment ads on Facebook that were targeted toward specific age groups, often excluding older generations.

While in previous reports of ad-based discrimination, Facebook immediately took action, the social media platform is standing its ground on this one. “Simply showing certain job ads to different age groups on services like Facebook or Google may not in itself be discriminatory -- just as it can be OK to run employment ads in magazines and on TV shows targeted at younger or older people,” Rob Goldman, Facebook’s vice president of ads, said in a statement. “What matters is that marketing is broadly based and inclusive, not simply focused on a particular age group.”

Read more