Lyft agrees to $272.5 million settlement over alleged driver misclassification

Lyft has agreed to a $272.5 million settlement over California drivers' claims that Lyft treated the drivers as contractors instead of employees. The settlement includes fees and costs. The agreement resolves claims from the state attorney general, city attorneys, the labor commissioner and private plaintiffs covering April 5, 2016, through December 15, 2020.

At least $237,075,000 is reserved for drivers based on hours and miles driven. The settlement allows payments over four years, plus up to $12.4 million in interest. Lyft booked a $210 million accrual in the fourth quarter of 2025. The attorney general announced the agreement today. The deal remains subject to court approval.

The lawsuit followed the introduction of the ABC test, a legal test used to analyze worker misclassification. The California Supreme Court first adopted the ABC test in 2018 in Dynamex Operations West, Inc. v. Superior Court. AB5 subsequently codified the ABC test into law. Proposition 22 altered how the ABC test applies to certain app-based drivers during the litigation. The attorney general and his partners won every legal challenge in court despite several appeals and changes in the law.

California Labor Commissioner Lilia Garcia-Brower said workers who came forward and spoke up made the settlement possible. Lyft said in an SEC filing dated September 30 that the deal is not an admission of liability. Lyft said resolving the matter now allows Lyft to avoid the costs and distraction of prolonged litigation and keep management focused on business goals.