Daniel Mercer
In 2020, the state of California filed a lawsuit against Uber and Lyft for incorrectly classifying workers as independent contractors.
Lyft is set to pay $272.5 million to resolve a lawsuit filed in May 2020. This lawsuit claimed that both Lyft and Uber were misclassifying their drivers as independent contractors, according to California Attorney General Rob Bonta’s announcement on Thursday. The lawsuit arose after the enactment of Assembly Bill 5, which designated gig workers as employees, yet it occurred before the changes brought by the passage of Proposition 22.
Pending court approval, Lyft will allocate $272.5 million in penalties, with a significant portion—at least $237,075,000—earmarked for reimbursing workers for unpaid minimum wages and owed benefits. “Driver eligibility and compensation will be calculated based on hours worked and miles traveled from April 5, 2016, to December 15, 2020,” the announcement specified.
The introduction of Assembly Bill 5 in 2019 established the “ABC test,” a legal framework that companies must follow to classify workers as independent contractors instead of employees. The initial wording of the bill permitted Lyft and Uber drivers to be recognized as employees entitled to minimum wage and various protections. Faced with the potential threat to their business models, both companies supported Proposition 22 in November 2020. This ballot initiative created exemptions from the ABC test, allowing gig workers to be classified as contractors while ensuring they received certain benefits, including healthcare subsidies.
The legality of Proposition 22 has faced challenges from workers, but the California Supreme Court upheld the law as recently as 2024. While Lyft’s settlement addresses the state’s allegations against the company and represents a significant victory for gig workers, the lawsuit’s implications for Uber remain unresolved.
