The story has been updated. See below.
Ride-hailing company Lyft is set to finally settle a two-year-old lawsuit over its classification of its drivers as contract workers instead of employees.
On Tuesday evening, the company filed documents in San Francisco federal court to settle a class action lawsuit brought Lyft in 2013 by former drivers Patrick Cotter, Alejandra Maciel, and Jeffrey Knudtson. In the lawsuit, the drivers alleged that because Lyft has misclassified them as contract workers instead of employees, it owes them reimbursement for expenses like gas and car maintenance. A number of California drivers will be able to apply to receive part of the payout, provided they meet certain criteria.
As part of the settlement, which still needs to be approved by a federal judge, Lyft has agreed to pay a total of $12.25 million. The company also agreed to change its terms of service agreement with drivers so that it can only deactivate them from the service for specific reasons, such as low ratings from passengers, and will give them an opportunity to address feedback before being deactivated. It will also pay arbitration costs for drivers who want to challenge being deactivated or other compensation complaints.
However, the proposal clearly stipulates that Lyft won't be changing how it classifies its drivers, who will continue to be employed as contract workers. Lyft is also not admitting that it wrongly classified the lawsuit's plaintiffs.
Though some of the company's drivers work full-time for the service, Lyft says that 80% of its drivers currently drive 15 hours or less per week. In October, Uber co-founder and CEO Travis Kalanick said that more than half of the company's drivers work nine hours per week or less.
“We are pleased to have resolved this matter on terms that preserve the flexibility of drivers to control when, where and for how long they drive on the platform and enable consumers to continue benefitting from safe, affordable transportation,” said Lyft general counsel Kristin Sverchek in a statement.
The case's settlement comes in the midst of rival Uber's own similar legal battle. It's currently embroiled in a highly publicized case in California federal court that also questions its decision to classify drivers as contract workers. Employment attorney Shannon Liss-Riordan is representing the plaintiffs in both cases, as well as in others against startups also using contractors to deliver customer orders.
Though the settlement proposal won't change how Lyft classifies its drivers—and therefore won't force it to start providing them with benefits—Liss-Riordan told Reuters that her firm has received far fewer complaints from Lyft drivers since. This leads her to believe that Lyft and its policies treat the drivers better than Uber treats its own. Uber declined to comment on the settlement proposal.
A hearing for a preliminary approval of this settlement proposal is currently scheduled for February 18 in San Francisco.
The story has been updated with a response from Uber, which declined to comment on the news.