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Ride-sharing company Lyft will pay $12.25 million to settle a class action lawsuit with its drivers over their employment status and compensation issues. This could be seen as a victory for Lyft, since the settlement will allow the company to avoid classifying drivers as employees and the additional costs and legal liability that would entail.
It also remains to be seen how this will affect current litigation involving Lyft's main competitor, Uber.
That was, and still is, the biggest question involving ride-share drivers and other gig economy workers. And it is no small distinction. Classifying Lyft drivers as employees would mean the company would have to comply with federal wage and hour laws and provide additional benefits while the drivers would have more legal protections. This would obviously impact Lyft's profits and their valuation as well as the value of other startups whose business models rely on using independent contractors.
This settlement leaves Lyft drivers with that legal classification. Kristin Sverchek, Lyft's general counsel, said in a news release, "We are pleased to have resolved this matter on terms that preserve the flexibility of drivers to control when, where and for how long they drive on the platform and enable consumers to continue benefiting from safe, affordable transportation." Of course, control over the work schedule is one of the factors used in distinguishing between employees and independent contractors.
Considering Lyft was facing the prospect of paying back wages and benefits, back taxes, and punitive damages for misclassifying its drivers, $12.25 million seems pretty light. And Lyft is making a few other conciliations to its drivers.
As part of the settlement, drivers will receive additional protections in regards to deactivation. Lyft has agreed to only deactivate drivers for specified reasons, like low passenger ratings, and the company will now provide notice to drivers prior to deactivation. Drivers will now have an opportunity to address those issues before they are deactivated, and Lyft will pay the arbitration expenses for any driver challenging their deactivation or disputing other compensation.
The settlement has yet to be approved by the court, but that approval is expected next month.
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