Lyft has agreed to pay $272.5 million to settle a California Labor Commissioner lawsuit alleging the company misclassified drivers as independent contractors, denying them minimum wage, overtime, and other employee protections.
Lyft has agreed to pay $272.5 million to settle a lawsuit brought by California's Labor Commissioner's Office, resolving allegations that the ride-hailing company violated state law by classifying drivers as independent contractors rather than employees.
The settlement, disclosed in a regulatory filing, covers alleged violations from April 6, 2016 through December 15, 2020 — a period during which California was actively debating the legal status of gig economy workers. A judge must still approve the agreement before it takes effect.
In its filing, the company said it believes the settlement will allow it to avoid the "costs and distraction of protracted litigation and enable management to maintain its focus on executing its business objectives."
The original lawsuit, filed by the California Labor Commissioner's Office in August 2020, alleged that Lyft denied drivers minimum wage and overtime pay, along with other employee protections such as paid sick leave and timely wage payments.
California Labor Commissioner Lilia García-Brower credited the affected workers for the outcome. "This settlement is about the workers who came forward and spoke up. Their voices made this outcome possible," she said in a statement. García-Brower also said the Labor Commissioner's Office will forgo its share of the settlement and direct those funds to drivers who filed wage claims.
The legal dispute traces back to Assembly Bill 5, a 2019 state law that required companies relying on gig workers — including DoorDash, Lyft, and Uber — to classify those workers as employees entitled to minimum wage, workers' compensation, and other benefits. Even after AB 5 took effect, Lyft and Uber continued to classify drivers as contractors, drawing legal action from the Labor Commissioner's Office, the California Attorney General, and the City Attorneys of Los Angeles, San Diego, and San Francisco. Private suits filed under California's Private Attorneys General Act were also coordinated in San Francisco Superior Court in September 2021.
The legal landscape shifted in November 2020, when California voters passed Proposition 22 — a ballot measure that carved out app-based transportation companies from AB 5's requirements and restored the contractor classification for drivers going forward. As a result, the settlement covers only the period before Proposition 22 took effect.
The resolution closes the matter for Lyft, but Uber still faces a separate, similarly structured lawsuit from the Labor Commissioner's Office, signaling that the broader legal reckoning over gig worker classification in California is not yet finished.
The settlement reinforces the financial exposure that platform companies can face when their workforce classification strategies conflict with state labor law — even after the underlying regulatory framework has since been revised by voters.
Jay Goldberg is a staff writer at TechEchelon covering technology, markets, and policy. He files the breaking news and deal coverage that move the publication's core desks.
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