Uber and Lyft were sued by the state of California in 2020 for misclassifying employees as contractors.
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Lyft will pay $272.5 million to settle a May 2020 lawsuit that alleged both it and Uber were misclassifying employees as contractors, California Attorney General Rob Bonta announced in a statement on Thursday. The lawsuit was filed following the passage of Assembly Bill 5, which classified gig workers as employees, but before the reclassification introduced by the passage of Prop 22.
If the settlement is approved by the court, Lyft will pay $272.5 million in penalties, with at least $237,075,000 of that total reserved for paying back workers for the minimum wage and benefits they’re owed. “Driver eligibility and compensation will be based on the number of hours and miles driven between April 5, 2016, through December 15, 2020,” the statement says.
The passage of Assembly Bill 5 in 2019 codified what’s called the “ABC test” into law, criteria businesses have to use to prove their workers are independent contractors rather than employees. The original language of the bill allowed Lyft and Uber drivers to be classified as employees who were owed a minimum wage and other protections. Because the classification threatened the business model of gig work platforms like Lyft and Uber, both companies backed Prop 22 in November 2020. The ballot measure created carve-outs from the ABC test that reclassified gig workers as contractors, while guaranteeing them certain benefits like healthcare subsidies.
Workers have challenged the legality of Prop 22, but the law has been upheld by the California Supreme Court as recently as 2024. While Lyft’s settlement resolves the state’s claims against the company and is a meaningful win for gig workers, Uber’s portion of the lawsuit remains unresolved.