Lyft has agreed to pay $272.5 million to settle a long-running California lawsuit accusing the company of misclassifying its drivers as independent contractors rather than employees, according to a securities filing and people familiar with the matter. The settlement, which still needs a judge's approval, is more than ten times the size of the $27 million deal Lyft reached with drivers over similar claims in 2017.
The case was brought by the California Labor Commissioner's Office in August 2020 and later coordinated in San Francisco Superior Court with claims from the state attorney general and the city attorneys of Los Angeles, San Diego and San Francisco. It covers alleged violations from April 6, 2016, through December 15, 2020, and claims drivers were denied minimum wage, overtime pay, paid sick leave and timely payment of wages because Lyft classified them as contractors rather than employees.
Under the deal's terms, Lyft can pay the settlement over four years, with 5% simple interest accruing after the first year, capped at $12.4 million in total interest. The company had already set aside a $210 million accrual for the matter in the fourth quarter of 2025. The settlement agreement explicitly states that it is not an admission of liability.
A costly coda to the gig-work fight
California Labor Commissioner Lilia García-Brower framed the settlement as vindication for drivers who filed complaints years ago: "This settlement is about the workers who came forward and spoke up." A Lyft spokesperson countered that the company "believes drivers have always been properly classified" and settled chiefly to avoid "protracted litigation."
The underlying legal fight has mostly been settled by ballot box rather than courtroom. California's Proposition 22, approved by voters in November 2020, created a carve-out from the state's AB5 law that let Lyft, Uber and similar companies keep classifying drivers as contractors going forward, in exchange for a narrower set of guaranteed benefits. This settlement deals only with the window before Proposition 22 took effect, when drivers argue they were still entitled to full employee protections.
Uber faces a nearly identical lawsuit from the same California Labor Commissioner's Office that remains unresolved. Lyft's willingness to pay nearly ten times its earlier settlement suggests the company wanted the older claims closed out before the case went to trial, even as the current classification framework under Proposition 22 remains untouched.
