SACRAMENTO — Lyft Inc. has agreed to pay $12.25 million to settle a worker classification lawsuit in a deal that maintains its drivers’ status as independent contractors, a key aspect of the ride-hailing app’s business model.
The proposed agreement will allow drivers to submit claims for payment based on hours worked; the more time a driver spent in “ride mode,” the more money he or she can seek. Lyft also agreed to change its at-will termination provision to specify what actions will lead the company to deactivate a driver’s account. Lyft will also pay for any arbitration costs associated with drivers’ claims and, “as soon as possible,” create an unspecified reward program for drivers who receive good reviews from passengers.
“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,” Lyft general counsel Kristin Sverchek said in a prepared statement. “Apart from this settlement, we continue to explore a variety of ways to provide services and support for our driver community, including the potential for portable benefits.”
The agreement, which would fully resolve the putative class action Cotter v. Lyft, 13-4065, has been submitted to U.S. District Judge Vince Chhabria of the Northern District of California for approval.
The Lyft settlement could have big ramifications for other lawsuits challenging workers’ classification in sharing-economy startups and particularly for Uber Technologies Inc., which is facing nearly identical litigation in the Northern District courtroom of U.S. District Judge Edward Chen.
“I can’t see how it wouldn’t have some impact” on the Uber class action, said Daniel Hutchinson, a partner at plaintiffs firm Lieff Cabraser Heimann & Bernstein. “Given the all-or-nothing aspect of this litigation—it’s not only significant litigation, it’s also challenging the way Uber does business—the stakes for Uber are very high.”
The same Boston attorney, Shannon Liss-Riordan of Lichten & Liss-Riordan, is representing plaintiffs in both the Lyft and Uber worker-classification suits. She did not return messages left Wednesday.
The settlement appears to be a move ripped straight from Lyft’s regulatory and litigation playbook. Unlike its more aggressive rival, Uber, the company is known for working with potential opponents and reaching resolutions before confrontations last too long or become too costly. Sverchek told The Recorder in an interview last year that the company will “fight tooth and nail” when warranted but added that “collaboration is really what Lyft does best.”
Stephen Hirschfeld, a partner at Hirschfeld Kraemer, cautioned against drawing parallels between the Lyft settlement and other outstanding lawsuits challenging the gig economy. Liss-Riordan has “more leverage” in the Uber lawsuit, he said, because the judge has certified that class action, set a trial date and ruled Uber’s arbitration clause unenforceable.
The Lyft settlement “says to me that the plaintiffs’ lawyer in this case was willing to resolve this short of destroying the business model by pursuing due process rights and some job security for the drivers,” Hirschfeld said. “She got that, and Lyft got some finality.”
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