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​Lyft paying $27M to settle driver classification suit

A California judge gives final approval in the class action lawsuit, confirming that the ride-hailing company's drivers will remain independent contractors.

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Lyft will pay $27 million to settle a class-action lawsuit with its California drivers.

Lyft

The showdown between ride-hailing service Lyft and its California drivers appears to have come to an end.

US District Judge Vince Chhabria gave final approval on Thursday to a $27 million settlement agreement for a class-action lawsuit between Lyft and more than 200,000 of its former and current California drivers, according to court filings.

This settlement seems to conclude the battle over how the ride-hailing company classifies its drivers. Under the agreement, the drivers will remain independent contractors, rather than be converted to employees.

"We are pleased the court has taken the final step and approved the settlement agreement which will preserve the flexibility of drivers to choose when, where and for how long they drive with Lyft," a company spokesman said in an email.

Lyft, which is a top rival to ride-hailing behemoth Uber, launched its service in 2012 in San Francisco. Since then, it's spread to 300 cities across the US. Like Uber, Lyft's business model depends on drivers being independent contractors so it doesn't have to pay worker costs, such as overtime, health insurance, Social Security and paid sick days. Drivers also supply and maintain their own cars, so Lyft doesn't pay for gas, repairs and other related expenses.

Lyft drivers in California sued the company in 2013, claiming they were being misclassified as independent contractors, rather than employees. Originally, the case was set to settle for $12.25 million, but Judge Chhabria rejected that agreement in April saying it "short-changed" drivers. In June, the judge granted preliminary approval for the $27 million settlement.

"We are very pleased to be at the end of this process," attorney Shannon Liss-Riordan, who represents the drivers, said in an email. "The settlement provides substantial benefit to Lyft drivers -- both monetary and non-monetary."

As part of the settlement, drivers will get more protections like additional job security and the ability to challenge day-to-day grievances, said Liss-Riordan. California drivers who logged the most miles will get the biggest monetary payout -- with full-time drivers getting $2 to $4 for every hour they've driven for the company, and all other drivers getting $1 to $2.

"The question of whether the drivers are appropriately classified as employees or independent contractors will have to wait for another day," Liss-Riordan said.

A similar case against Uber involving 385,000 of its drivers in California and Massachusetts is still ongoing. The company sought to settle the suit for $100 million last April, but in August the judge for the case rejected the offer saying it was unfair, inadequate and unreasonable for drivers.

While Lyft's settlement seems to close the debate over driver classification, things could still change.

"The agreement is not perfect," Chhabria wrote in his order on Thursday. "And the status of Lyft drivers under California law remains uncertain going forward."

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