Lyft Pays $272.5 Million to Settle Driver Misclassification Suit

Sacramento, California's attorney general and three city attorneys announced a $272.5 million settlement with Lyft on Thursday, resolving allegations that the ride-hailing company misclassified drivers as independent contractors rather than employees between 2016 and 2020, according to a statement cited by Ars Technica.

How much is Lyft paying, and who announced it?

The $272.5 million figure covers claims brought jointly by the California attorney general's office and city attorneys, including Los Angeles. Attorney General Rob Bonta called it "the largest misclassification settlement in California's history," saying rideshare companies "like Lyft have enjoyed massive growth and profits on the backs of drivers over the past decade, many who are from immigrant communities and communities of color," according to the statement reported by Ars Technica. Los Angeles City Attorney Hydee Feldstein Soto said the deal "sends a clear message: Companies must follow the law, pay their fair share, and play by the rules."

The settlement resolves claims against Lyft only. A parallel case against Uber, filed by the same officials, continues, Ars Technica reported.

Why did California sue Lyft in the first place?

The litigation traces to May 2020, when then-Attorney General Xavier Becerra — now the Democratic candidate for governor — sued both Uber and Lyft, alleging the companies evaded state labor law by declaring their drivers were not employees, per the Ars Technica account. The suit accused Lyft of committing wage theft through misclassification during the 2016-to-2020 window that Thursday's settlement covers.

What state law triggered the case?

California's claim rested on Assembly Bill 5, the 2019 law that codified a three-part test for determining whether a worker qualifies as an independent contractor or an employee. Under that test, companies bear the burden of showing a worker is free from the hiring entity's control, performs work outside the company's usual business, and operates an independently established trade — a standard regulators argued Lyft's driver model failed to meet.

How did Proposition 22 change the picture?

In November 2020, California voters approved Proposition 22, a ballot measure organized primarily by Uber and Lyft that exempted ride-hailing and delivery companies from AB5's classification test going forward. That carve-out is why Thursday's settlement is bounded to the 2016-2020 period — the years before Proposition 22 took effect — rather than extending to the present.

What does Lyft say about the deal?

Lyft CEO David Risher pointed to the 2020 vote in a statement provided to Ars Technica. "The vast majority of rideshare drivers in California have always wanted to be independent contractors," he said, "and voters affirmed that when they passed Prop 22 in 2020, giving drivers new benefits and protections while preserving their flexibility." Risher added that Lyft has "gone further than Prop 22 requires, becoming the only rideshare company with a fee cap," and said the company "believes drivers have always been properly classified under the law" while welcoming the chance "to put this case behind us."

Why do critics say the settlement falls short?

Veena Dubal, a law professor at the University of California, Irvine, and a longtime critic of Uber and Lyft's labor practices, told Ars Technica the settlement should not be read as a clear victory for drivers. "While the state should be lauded for taking on these behemoth firms, this is a paltry sum compared to what drivers are owed," Dubal wrote, arguing the withheld wages "would have gone to rent and food for families."

What happened and when

• 2016–2020: The period during which California alleges Lyft misclassified drivers as contractors rather than employees.
• May 2020: Then-Attorney General Xavier Becerra sues Uber and Lyft over driver classification.
• November 2020: California voters pass Proposition 22, exempting rideshare companies from AB5's classification test going forward.
• Thursday (reported Oct. 2, 2026): California's attorney general and city attorneys announce the $272.5 million settlement with Lyft; the parallel case against Uber continues.

The Uber litigation remains active, meaning the broader legal question over driver classification in California during the same 2016–2020 window has not been fully resolved for the industry.