Employment Law Daily Lyft drivers seek court’s OK for $12M misclassification settlement
Friday, January 29, 2016

Lyft drivers seek court’s OK for $12M misclassification settlement

By Joy P. Waltemath, J.D. Representatives of a class of California drivers for Lyft, Inc., are seeking preliminary approval of a proposed Rule 23 class action settlement agreement to resolve California Labor Code claims based on drivers’ alleged misclassification as independent contractors. The proposed settlement includes a non-reversionary payment in the amount of $12,250,000, and “forward-looking non-monetary relief”; notably, it does not include classifying drivers as employees, instead of as independent contractors. Just over a year ago, a federal district court in California ruled, in Cotter v. Lyft, Inc., that issue—whether Lyft drivers were employees or independent contractors—was for a jury to decide. $12.25M. According to the proposed class action settlement agreement and supporting memoranda, the settlement follows “years of hard-fought litigation” and was achieved after four separate mediation sessions with a magistrate judge. The agreement itself has two primary components: a non-reversionary payment in the amount of $12,250,000, and forward-looking non-monetary relief, which will give drivers additional workplace protections, including a change from at-will status. Limits on driver “deactivation.” Specifically, under the proposed agreement, Lyft will change its Terms of Service to (1) remove Lyft’s current at-will termination provision and replace it with a provision that allows Lyft to deactivate drivers only for specific delineated reasons or after notice and an opportunity to cure period is provided, and (2) provide that Lyft will pay for the arbitration fees and costs unique to arbitration for claims brought by a driver against Lyft related to a driver’s deactivation, pay-related issues, or alleged employment relationship with Lyft. Drivers will be able to contend that a deactivation for any reason other than those delineated constitutes breach of contract by Lyft and will have a realistic avenue via arbitration to challenge any alleged breaches by Lyft. This limitation on Lyft’s ability to deactivate drivers at-will, and corresponding agreement to deactivate drivers for only specific reasons or after notice and an opportunity to cure, provides significant protections to Lyft drivers that “they do not currently have and is more in line with an independent contractor relationship,” according to plaintiffs’ counsel. Further, these “non-monetary changes provide Drivers a real benefit and a practical mechanism through which they can challenge terminations that they contend violate Lyft’s contract and disputes relating to compensation.” More driving, more dollars. As for the financial component of the proposed settlement, drivers who, more often than not, have worked close to full time hours for Lyft (those who drove for 30 hours or more per week for more than half of the weeks they provided Lyft rides)—who arguably have the strongest claims on the merits—will receive larger payments than drivers who provided few Lyft rides. Attorneys’ fees. With respect to attorneys’ fees, the filing notes that plaintiffs’ counsel may apply for fees and costs not to exceed 30 percent of the gross settlement fund; the settlement is not contingent upon the court approving counsel’s application for fees. Counsel’s costs are folded in to the 30 percent figure and are not separately recoverable. And while a 30 percent fee falls above the Ninth Circuit’s 25 percent “benchmark,” the motion asserts it is “well-justified by the novelty and complexity of litigating one of the first 'sharing economy' cases.”

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