Ride-hailing company Lyft has agreed to pay $12.25 million and offer new protections to its drivers to settle a proposed class-action suit regarding worker classification.

In the lawsuit, Lyft’s drivers asserted they are employees — not independent contractors — and, as such, were entitled to Fair Labor Standards Act (FLSA) protections, including reimbursement for their gas and vehicle maintenance expenses. Currently, drivers pay these costs themselves.

Workers who are legitimately classified as independent contractors are not covered by the FLSA’s protections. However, an employer’s misclassification of workers as independent contractors can result in serious legal consequences for the offending company.

The Lyft case, along with a similar case filed against its biggest competitor, Uber, has been closely watched. A finding that the on-demand drivers are employees could impact other players in the sharing economy that also rely on individuals to provide rides and house-cleaning services, among other things.

Under Lyft’s proposed settlement, which is pending approval by a California federal court, drivers will remain classified as independent contractors, not employees. However, the agreement provides that, as independent contractors, drivers will get the following benefits:

  • The company can fire drivers only for specified reasons, including low passenger ratings. Previously, Lyft could terminate a driver’s services without notice for any reason.
  • Drivers will be given the opportunity to address any issues before they are let go.
  • Lyft will pay the arbitration expenses for any driver who wants to challenge their termination or dispute their compensation.

According to experts, while the proposed settlement includes some costs for Lyft, it would have been more expensive and complicated for Lyft to classify its drivers as employees.

Misclassification of workers is just one method by which employers attempt to circumvent state and federal labor laws and withhold employees’ hard-earned wages. If you suspect that you have been a victim of wage theft, please contact the attorneys in Sommers Schwartz’s Employment Litigation Group today – we can help.

Jason J. Thompson

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Jason J. Thompson

Jason Thompson is a nationally board certified trial attorney and co-chairs Sommers Schwartz’s Complex Litigation Department. He has a formidable breadth of litigation experience, including class action and multidistrict litigation (MDL), and practices nationwide in both state and federal courts.