Lyft to pay $272.5 million to settle California driver misclassification suit

Lyft will pay $272.5 million to settle a lawsuit alleging it misclassified California drivers as independent contractors and denied them employee protections, California Attorney General Rob Bonta announced on 1 October 2026. The deal resolves claims covering driving between 5 April 2016 and 15 December 2020 and still needs approval from San Francisco Superior Court before any money moves.engadget.com

At least $237,075,000 of the $272.5 million total is reserved for paying back workers the minimum wage and benefits they are owed, and about 87% of the settlement will go to drivers who worked for Lyft. Eligibility and payment amounts depend on the hours and miles each driver logged between 5 April 2016 and 15 December 2020. A third-party administrator will contact eligible drivers and set up a website, email address and call centre.usatoday.com

What the settlement covers

The case started with two separate actions. In August 2020, the California Labor Commissioner's Office sued Lyft in Alameda County Superior Court, arguing drivers were denied minimum wage, overtime pay and paid sick leave. At the same time, Bonta and the city attorneys of San Francisco, Los Angeles and San Diego filed their own suit alleging misclassification between 2016 and 2020. The cases were combined and consolidated in 2021.

How the case began and merged

The legal test at the centre of the dispute is the ABC test, which requires businesses to prove workers are independent contractors rather than employees. California's Supreme Court set it out in a ruling, and lawmakers wrote it into law through Assembly Bill 5. Voters then approved Proposition 22 in November 2020, which carved out app-based drivers from that test and let companies keep treating them as contractors in exchange for certain benefits.

The settlement splits the money several ways. Of the total, $20.44 million goes to the state and participating cities as civil penalties, just under $15 million is set aside for attorney fees and costs tied to the Private Attorneys General Act plaintiffs, and $5.45 million is earmarked for drivers who already had pending wage claims. Labor Commissioner Lilia García-Brower said her office is giving up its own $5.45 million share so more money reaches drivers.

How the money is divided

Lyft can pay over four years: $120 million in the first year after the settlement takes effect, then $152.5 million across the following three years, with that balance carrying 5% simple annual interest. The bulk of the driver money is generally divided by the miles each driver logged while picking up or carrying passengers during the covered period. Labor Commissioner Lilia García-Brower said her office is giving up its own $5.45 million share so more money reaches drivers.

Payment schedule and objections

Lyft maintains its drivers were properly classified. "Lyft believes drivers have always been properly classified under the law, and we're glad to put this case behind us," the company said. Chief Executive David Risher said the deal spares the company "a long, costly fight". Bonta disputed that at a press conference: "Make no mistake, misclassification is how companies cheat workers."

Disputes over scope remain. Rideshare Drivers United said the settlement falls short of the $434 million in claims it filed for about 1,900 Lyft drivers, and San Diego City Attorney Heather Ferbert noted the fight is not over: "Lyft is only part of the picture." The state and cities also sued Uber over similar allegations, and that case remains pending. The settlement covers no conduct after 15 December 2020.