Human cloud ride-sharing platform Lyft will pay $12.25 million to settle a class action case claiming it misclassified drivers as independent contractors. The proposed settlement was included in court records filed Tuesday.
Lyft drivers will remain independent contractors under the deal, according to court records. However, the settlement calls for drivers to have additional rights — they will no longer be able to be fired at will, instead Lyft could only deactivate drivers for specific reasons. Lyft will also pay arbitration fees for drivers who bring claims over their deactivation or regarding pay.
Plaintiffs cited Lyft’s contract calling for individual arbitration as a possible roadblock in the case and a reason for the settlement.
The case has not yet been certified a class action and Lyft’s contract may have prevented that. The situation was different for Uber, where a class action case was certified in a lawsuit by the same attorney as in the Lyft case, Shannon Liss-Riordan. But due to wording used in the Uber contract involving individual arbitration, plaintiffs could still participate in the class action suit.
Contract language requiring arbitration has come up often in other sharing economy class certifications, according to the settlement language.
“Plaintiffs’ counsel has litigated the enforceability of arbitration provisions extensively in the context of other ‘sharing economy’ cases, and courts have regularly compelled individual arbitration,” according to records in the settlement filing.
“The settlement, should it be approved, is likely welcome news to on-demand Human Cloud companies,” said David Francis, a research analyst with Staffing Industry Analysts. “For a company that has raised more than $2 billion, a $12.25 million settlement that allows it to keep operating largely as it had been seems a rather good deal. Unfortunately, the settlement does not ‘rest the case’ in terms of worker classification, and certainly this is not the last we’ll see this issue raised in the courtroom.”
Money from the settlement will be paid to drivers on a point system based on the amount of time they were in “ride mode.” The suit estimates there are more than 100,000 drivers in California who have given at least one Lyft ride.
The $12.25 million settlement is the latest bit of news from Lyft. The company recently closed an investment round, including $500 million from General Motors. Staffing Industry Analysts ranks Lyft as the sixth-largest human cloud firm.
Separately, the lawsuit against Uber claiming that company misclassified drivers as independent contractors continues.