Uber and Lyft were sued by the state of California in 2020 for misclassifying employees as contractors.
Lyft will pay $272.5 million to settle a May 2020 lawsuit alleging that both it and Uber misclassified employees as contractors, California Attorney General Rob Bonta announced in a statement Thursday. The lawsuit was filed after the passage of Assembly Bill 5, which classified gig workers as employees, but before the reclassification brought about 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 set aside to repay workers for the minimum wage and benefits they are owed. “Driver qualification and compensation are based on the number of hours and miles driven between April 5, 2016 and December 15, 2020,” the statement said.
The passage of Assembly Bill 5 in 2019 codifies what is called the “ABC Test” into law, criteria that businesses must use to prove that their workers are independent contractors rather than employees. The bill’s original language allowed Lyft and Uber drivers to be classified as employees who were owed minimum wage and other protections. Because the classification threatened the business model of gig work platforms like Lyft and Uber, both companies supported 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 such as health subsidies.
Workers challenged the legality of Prop 22, but the law was struck down by the California Supreme Court as recently as 2024.