Judge Rejects $12.25 Million Lyft Settlement

San Francisco, CAA federal judge has rejected the settlement of a California labor lawsuit, finding plaintiffs’ attorneys undervalued the drivers’ claims and settled the suit for too little money. The ruling came in a California labor claim alleging Lyft drivers were misclassified as independent contractors, which deprived them of the protections and benefits given to employees. Although a preliminary settlement was reached, that settlement did not see drivers reclassified as employees, leading Teamsters and other Lyft drivers to file objections to the settlement.

In a decision handed out in April, US District Judge Vince Chhabria ruled the settlement was unfair to plaintiffs because it reimbursed them for only half their claims and did not provide enough non-monetary benefits to make up for the shortfall in financial compensation. Reimbursements are a sticking point in misclassification lawsuits. Employees would be eligible for reimbursement of certain expenses, including gas and vehicle maintenance. Independent contractors are required to cover those costs on their own. But to be independent contractors, workers must have more authority and discretion over their job duties.

In all, the proposed settlement involved around $12.25 million, a fraction of the estimated reimbursement of $64 million. Under that amount, each driver involved in the lawsuit would have received about $56, once attorney’s fees and expenses were deducted, according to Bloomberg (3/24/16). But the $64 million figure was based on old driver data. New data, involving figures up to and including February 2016, indicated drivers could have been eligible for up to $126 million in reimbursements if they were employees.

Chhabria said the $12.25 million settlement was not reasonable given that driver reimbursement could actually total around $126 million.

The Teamsters and some Lyft drivers filed objections to the settlement, arguing that because the settlement did not reclassify Lyft drivers as employees, Lyft would be able to continue imposing unfair “terms of use” on its drivers while still denying those drivers rights. Chhabria has not said a settlement must reclassify drivers as employees, but did indicate a new settlement must offer at least $21 million to the drivers. The two sides must now propose a new settlement. If one cannot be reached, the case will go to trial.

This decision and the new settlement or trial will likely be closely watched by the two sides in an Uber lawsuit. That lawsuit also alleges drivers were misclassified by Uber as independent contractors even though they were treated like employees.

The Lyft lawsuit is Cotter v. Lyft Inc., 13-cv-04065, US District Court, Northern District of California (San Francisco).