California’s attorney general and three city attorneys announced a $272.5 million settlement with Lyft after allegations that the company “committed wage theft by misclassifying drivers as independent contractors rather than employees” between 2016 and 2020, according to a Thursday statement.
The case dates back to May 2020, when then-Attorney General Xavier Becerra, who is now the Democratic candidate for governor, sued both Uber and Lyft. That lawsuit said the ridehailing companies evaded state law when they declared that their drivers were not employees.
Thursday’s settlement affects only Lyft, while the case against Uber continues.
“We are proud to announce this landmark win for workers, the largest misclassification settlement in California’s history,” Attorney General Rob Bonta said in the statement. “Rideshare companies like Lyft have enjoyed massive growth and profits on the backs of drivers over the past decade, many who are from immigrant communities and communities of color.”
The city attorneys echoed this sentiment.
“Los Angeles and our statewide partners will not allow businesses to exploit their workers and evade their obligations under the law,” Los Angeles City Attorney Hydee Feldstein Soto said in the same statement. “When companies misclassify their workers, they deny them critical protections and shift the burden onto taxpayers. This historic settlement sends a clear message: Companies must follow the law, pay their fair share, and play by the rules.”
Ever since these rideshare companies began in the early 2010s, they have been scrutinized for underpaying and mistreating drivers. The specific state law that California used to challenge the companies is known as Assembly Bill 5 (AB5), which enshrined a three-part test to determine if someone is properly classified as an independent contractor or an employee.
In November 2020, California voters approved a state ballot measure, Proposition 22, which was organized primarily by Uber and Lyft. The new law gave ride-hailing companies an exemption to AB5—which is why this settlement only covers the 2016-2020 period.
In a statement provided to Ars Technica, Lyft CEO David Risher pointed to the Proposition 22 vote. “The vast majority of rideshare drivers in California have always wanted to be independent contractors,” he said, “and voters affirmed that when they passed Prop 22 in 2020, giving drivers new benefits and protections while preserving their flexibility. And since then, Lyft has gone further than Prop 22 requires, becoming the only rideshare company with a fee cap. Lyft believes drivers have always been properly classified under the law, and we’re glad to put this case behind us.”
Veena Dubal, a law professor at the University of California, Irvine who has long been an outspoken critic of Uber and Lyft, emailed Ars to say that Thursday’s settlement should not be viewed as a pure win for drivers.
“While the state should be lauded for taking on these behemoth firms, this is a paltry sum compared to what drivers are owed,” she wrote. Their wages “would have gone to rent and food for families. And the fact that they only have to pay a small portion of what was owed to thousands of low-income, mostly immigrant and racial-minority workers means that this system is not working the way it should.”
In recent years, workers have continued to organize and advocate for better pay and working conditions. In August, the state’s labor board recognized the new California Gig Workers Union, which was formed after Gov. Gavin Newsom signed a law last year allowing such a union to be formed.
