California Attorney General Rob Bonta announced on Thursday that Lyft has agreed to pay $272.5 million to settle a lawsuit filed in May 2020 accusing the company and Uber of improperly classifying workers as independent contractors rather than employees.
The legal action was initiated after the state passed Assembly Bill 5 in 2019, which implemented the strict “ABC test” to determine worker status. Under this framework, gig drivers were initially classified as employees entitled to minimum wage and benefits. However, the legislation was short-lived for the tech industry; both companies lobbied heavily for Proposition 22, which passed in November 2020 and carved out an exception for gig workers, allowing them to remain classified as contractors while receiving limited benefits such as healthcare subsidies.
If the court approves the settlement, the funds will be distributed as penalties. At least $237,075,000 is designated to reimburse drivers for unpaid minimum wage and benefits. Eligibility for these payouts will be calculated based on the hours and miles driven between April 5, 2016, and December 15, 2020.
While this settlement marks a significant victory for gig workers and closes the case against Lyft, the state’s claims against Uber remain pending. The legality of Prop 22 has faced multiple challenges, but the California Supreme Court upheld the measure in 2024.
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