Lyft agrees to pay $27 million to settle driver lawsuit

Thomson Reuters

SAN FRANCISCO (Reuters) - Lyft has agreed to pay $27 million to settle a class action lawsuit brought by California drivers who claimed they should be deemed employees instead of independent contractors, after a U.S. judge rejected a previous $12.25 million deal as too small.

Lyft and larger rival Uber are attempting to resolve lawsuits by drivers who contend they should be classified as employees and therefore entitled to reimbursement for expenses, including gasoline and vehicle maintenance. Drivers currently pay those costs themselves.

A determination that these workers are employees would affect the profits and valuations at so-called on-demand technology companies.

U.S. District Judge Vince Chhabria had said the previous Lyft deal "short-changed" drivers because it represented only 9 percent of the potential value of drivers' reimbursement claims.

In the new deal, attorneys for drivers calculated that Lyft drivers could have recovered $156 million had they been classified as employees, based on a mileage reimbursement rate set by the U.S. government and data provided by Lyft.

The $27 million settlement represents about 17 percent of that amount, which Chhabria cited as a target in rejecting the previous deal.

Uber has agreed to settle a similar lawsuit involving California and Massachusetts drivers. The potential damages in that case was $852 million, more than the $732 million in commissions Uber earned in those two states, according to court filings.

The Uber settlement, worth up to $100 million, is about 12 percent of the potential damages. A separate U.S. judge is expected to review that deal in June.

One group of drivers has objected to the Uber deal, calling it unfair. Mark Geragos, a prominent Los Angeles attorney, formally entered the case on their behalf on Wednesday.

Drivers "deserve representation by lawyers willing to fight for them and take this case to trial to uphold the basic principles of employee rights," they wrote in a court filing.

Shannon Liss-Riordan, the attorney who has represented drivers in both the Uber and Lyft cases, has praised the settlements for providing immediate benefits to drivers. Liss-Riordan said Lyftdrivers who worked a significant amount of time could receive more than $10,000 under the deal, and full-time Uber drivers could get several thousand dollars as well.

Drivers would remain independent contractors under both deals, but Liss-Riordan said the cases faced significant risks going forward and drivers could end up with nothing.

"We are proud to have reached this new agreement, which will provide significant payments toLyft drivers who have put a lot of their time into this company," Liss-Riordan said.

In a statement, Lyft general counsel Kristin Sverchek said the increased payment reflected the company's growth over the past several months and maintains driver flexibility. The previous deal had been based on data from earlier last year.

A hearing on the Lyft deal is scheduled for June. 

(Reporting by Dan Levine; Editing by James Dalgleish, Andrew Hay and Bernard Orr)