Lyft Settles Labor Law Violation for $12M and Offers More Job Security
Lyft Inc. agreed to pay $12.25 million and give additional job security to a proposed class of current and former drivers suing the ride-hailing service in federal court, but will not classify drivers as employees. In the dispute, Lyft will also concede its right to terminate drivers at will, pay the costs to arbitrate drivers’ grievances and implement a pre-arbitration process, as well as provide drivers additional information on prospective riders such as their passenger ratings, according to the proposed settlement filed Tuesday.
Driver Patrick Cotter sued Lyft in September 2013 for allegedly classifying its drivers as independent contractors but treating them as full-time employees and taking 20 percent off their tips as an “administrative fee” in violation of multiple state labor laws.
Previously, Lyft’s terms of service stated that the company could deactivate a driver for any reason; now, the ride-hailing company will only be able to do so for one of a list of predetermined reasons, such as a low passenger rating, according to the settlement agreement. Drivers at risk of deactivation, meanwhile, will be given clear notice and an opportunity to present their side. If a driver is deactivated but would like to contest the decision, he or she he can challenge the ruling in arbitration at Lyft’s expense. Drivers will also be able to address pay-related issues in arbitration.
This settlement will have a direct impact on how Lyft’s competitor Uber will respond to similar claims against them. Uber refuses to acknowledge that their drivers are employees and entitled to employee benefits. Lyft’s settlement while not recognizing the drivers as employees extends more job security and benefits for Lyft drivers.