The settlement, which requires court approval, resolves allegations covering the period from April 2016 through December 2020. The case was brought by the state along with Los Angeles, San Francisco and San Diego and was later consolidated with lawsuits filed on behalf of thousands of Lyft drivers.
California sued Lyft in 2021, accusing the company of misclassifying drivers in a way that allowed it to avoid costs and obligations associated with employee status.
The dispute is part of a broader, long-running battle over the employment status of workers for app-based companies. Lyft, Uber and other businesses built around the gig economy have faced legal challenges for more than a decade over whether drivers and other workers should be treated as employees or independent contractors.
The classification has significant financial and legal implications. Employees are generally entitled to protections such as minimum wage and overtime under applicable federal and state laws, while independent contractors do not receive those employee protections in the same way.
California's Labor Commissioner's Office said the proposed settlement is the largest settlement involving wage-theft claims in the state's history.
Lyft, however, maintained that it had complied with the law and disputed the underlying allegations.
In a statement, the company said its drivers “have always been properly classified under the law” and added, “we're glad to put this case behind us.”
The agreement brings to a close a significant legal dispute over Lyft's treatment of its California drivers during a period when the state's gig-economy companies faced increasing scrutiny over worker classification.
The lawsuits also unfolded amid a wider national debate over the economic model used by ride-hailing and delivery platforms, with companies arguing that independent-contractor arrangements provide workers with flexibility while labor advocates and government authorities have challenged whether those arrangements adequately protect workers.
Lyft and Uber have faced similar disputes outside California. In 2023, the two companies jointly agreed to pay $328 million to settle claims brought by the New York attorney general involving alleged wage and labor violations.
The California settlement does not necessarily resolve the broader legal debate over how gig workers should be classified. Instead, it addresses the specific claims against Lyft concerning its California operations during the period covered by the agreement.
Court approval is still required before the settlement becomes final.