Ride-sharing Lyft agreed to a $12.25 million settlement with drivers over whether they should be treated as employees or contractors, according to a court filing late Wednesday.
The proposed settlement must be approved by a federal judge in San Francisco. A hearing seeking approval has been requested for February 18 before U.S. District Judge Vince Chhabria.
The closely watched case is one of several lawsuits faced by the online, car-sharing companies, including a hard-fought case still pending against Uber, also in San Francisco.
Lyft, like Uber, created online software applications, apps, that are used to link potential riders to drivers. The app allows riders to summon drivers and the companies have cut into taxi businesses nationwide using drivers who operate when they want and on a contract basis.
Beyond the dollar amount, the Lyft settlement proposal would impose several changes to Lyft’s business practices. Lyft would end its at-will firing provision and replace it will terms that allow Lyft to deactivate drivers only for specific, identified reasons or after notice and a chance for drivers to fight it.
Lyft would also pay arbitration fees and costs of arbitration claims brought by drivers against Lyft. Under current terms, arbitration of claims makes it financially impractical for drivers to challenge wage and other issues.
The changed terms would apply nationwide. But it would not have any impact on similar lawsuits against Uber, Grubhub, DoorDash or Caviar.
While the terms of the settlement change some of the working terms for drivers, it does not resolve the fundamental legal question of whether the start-ups can claim drivers as contractors or whether the drivers are company employees, thus entitled to wages, overtime, lunch breaks and payment of expenses for such things as car repairs and fuel.
That question is scheduled to go to trial in the case against Uber, O’Connor v. Uber, in June 2016 before U.S. District Judge Edward Chen.
Case: Connor v. Lyft, No. 13-cv-4065