Lyft agrees to more than double payment to drivers in court settlement

The ride-hailing company will pay $27 million instead of an earlier $12.25 million

Lyft car

App-based services are looking at a new model for worker benefits

Credit: Lyft

Lyft has agreed to pay US$27 million to settle a dispute with drivers in California, under pressure from the judge who found the earlier proposed payment of $12.25 million was too small.

The ride-hailing company and its rival Uber Technologies are keen to settle with the drivers in class-action lawsuits, without having to agree to their reclassification as employees, which would push up their costs.

The companies currently classify their drivers as independent contractors, which does not require them to pay the drivers benefits such as reimbursement in work-related expenses.

A filing by the lawyer for the drivers in another lawsuit in a California court suggests that Uber could have to pay over $700 million in mileage expense reimbursement and phone expenses between 2009 and April of this year, if its drivers in California and Massachusetts were classified as employees. Uber has contested the figure.

A current settlement proposal, which still needs the approval of the judge, would require Uber to pay the drivers $84 million with a subsequent top-up of $16 million depending on the company’s valuation if it goes public.

The new amount payable by Lyft represents roughly 17 percent of the maximum value of the class's reimbursement claim, as suggested by District Judge Vince Chhabria, according to a filing on Wednesday,

Under the revised settlement submitted to the U.S. District Court for the Northern District of California, the crucial driver reclassification issue will again not be addressed.

The app-based ride hailing company had earlier offered a $12.25 million settlement fund, including attorney fees and other costs, besides non-monetary relief to the about 100,000 drivers. The non-monetary benefits such as prevention of arbitrary termination continue under the new settlement.

Drivers affiliated to the Teamsters Union had objected to the earlier settlement, as they said it would continue to "misclassify" Lyft employees in California as independent contractors.

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