Lyft says it has agreed to pay $27 million to settle a class action lawsuit over whether its drivers in California are independent contractors or employees. That’s more than twice the $12.25 million the ride-hailing company originally agreed to in January, a sum that was subsequently rejected by a federal judge.
Under the new settlement, drivers who have worked a significant amount of time for Lyft—measured in months instead of days—could receive payments of more than $6,000 apiece, according to Shannon Liss-Riordan, the lawyer representing drivers. Drivers who have worked less would receive payments averaging around $25, she said.
The new settlement does not rule on the actual legal question at stake in the case: whether drivers for Lyft should be classified as contractors or employees.
It’s a potentially expensive matter. Companies can save an estimated 30% on labor costs by hiring workers as contractors, whom they aren’t required to supply with benefits, a guaranteed minimum wage, or reimbursement for on-the-job expenses. Court documents made public on May 9 in a separate class action against Uber estimated that Uber has saved $730 million since 2009 in unpaid expense reimbursements alone by hiring drivers in California and Massachusetts as contractors instead of employees.
Lyft’s original settlement was rejected by a federal judge in April as “glaringly” inadequate, after it came out that the proposed $12.25 million figure was only based on business through June 2015. Over the next nine months, Lyft grew rapidly, and drivers in the class action roughly doubled the number of miles they had covered up until then, leading US district judge Vince Chhabria to argue that “drivers were therefore shortchanged by half.”
“In light of Lyft’s continued growth, we agreed to update the resolution in a way that both increased monies paid to drivers and helped preserve their flexibility to control when, where and for how long they drive on the platform,” Kristin Sverchek, Lyft’s general counsel, said in a statement.
Uber agreed last month to pay $100 million to settle two lawsuits over employment misclassification.