As we’ve covered, Lyft has agreed to settle the class-action lawsuit brought by Shannon Liss-Riordan and Matthew Carlson on behalf of California drivers.  The attorneys’ statement regarding the settlement is worth reading – both because it provides important details about the settlement agreement, and because it offers insight into the thinking behind the agreement.  The complete statement, provided to OnLabor by Liss-Riordan, is below:

We are pleased to have reached a proposed settlement in the Lyft misclassification case we brought on behalf of California drivers. This settlement will provide substantial benefits to drivers and distribute reimbursement for some of the expenses they have incurred while driving for Lyft.

The monetary amount of the settlement – $12.25 million – is a good resolution to the case, particularly considering the obstacles we faced in challenging Lyft’s arbitration clause.  Unlike the case against Uber, where the court held Uber’s arbitration clause to be unenforceable, and therefore certified the case as a class action, we did not have the same arguments to make regarding Lyft’s arbitration clause and recognize that, because of it, it would be very difficult if not impossible, to pursue this case on a class basis as we are doing in the Uber case.

While the settlement does not achieve everything we had hoped for – namely a reclassification of the drivers as employees (as other sharing economy companies have done recently, including Shyp, Instacart, Luxe Valet, Munchery, Eden, and most recently Honor) – it will result in some significant changes that will benefit the drivers.

These changes include eliminating Lyft’s ability to terminate drivers at will.  Under this agreement, Lyft will only be able to deactivate drivers for one of a list of enumerated reasons, and drivers who are at risk of deactivation will be given notice of this risk and opportunity to cure the shortcoming before deactivation.

And if a driver does not agree that a deactivation was for a permitted reason, the driver can challenge that decision before a neutral arbitrator, at Lyft’s expense.  (Previously, Lyft  drivers may have been required to split the bill for expensive arbitration proceedings.)

Under the agreement, drivers will also be able to take up pay-related issues, if they feel they haven’t been paid properly, again before a neutral arbitrator at Lyft’s expense.  Other provisions that will benefit Lyft drivers include introduction of a favorite driver option, under which drivers who are tagged as favorites by their passengers will receive added benefits.

We believe this is a fair settlement and adequate resolution of the claims we brought, given the risks we faced in the litigation against Lyft.  Notably, Lyft has succeeded, in this same federal courthouse where our case is pending (the Northern District of California), in enforcing its arbitration agreement contained in driver contracts, which contains a ban on class actions.  This means that we probably would not have been able to proceed in this case as a class action on behalf of Lyft drivers in California, in contrast to how we are proceeding on a classwide basis against Uber on behalf of Uber drivers throughout California.  In the Uber case, the court has certified the case as a class action on behalf of almost all Uber drivers in California, and the court was able to do that because it held Uber’s arbitration agreement to be unenforceable.  In the Lyft case, we do not have the same arguments we can make that led us to victory on this point in the Uber case.

Unfortunately, the U.S. Supreme Court has been allowing companies to use arbitration agreements to ban class actions, and there are fewer and fewer arguments available to employees and consumers to challenge these agreements.  Without a class action, employees have little hope of bringing to an end widespread employment practices that they believe violate the law.

In this case, given our likely inability to pursue the case on a classwide basis because of Lyft’s arbitration clause, it would have been very difficult if not impossible to achieve global changes at Lyft other than through a settlement agreement. We are pleased that we were able to reach this resolution, which will create a substantial benefit for Lyft drivers going forward.  And it will also reimburse drivers for some of the costs they have had to pay in order to do their work for Lyft.  Although the amount we were able to recover in monetary damages through this agreement ($12.25 million) – a figure arrived at after months of negotiations overseen by a federal magistrate judge – is less than we would have hoped, in the face of the challenges we faced in the litigation (most notably the arbitration clause), we think this is a good result.

(We estimate that this is just under 20% of the amount we might have recovered if we won the Lyft case at trial, on a classwide basis, and the verdict was affirmed on appeal.  Notably, the amount we think we could have recovered if we continued this case and prevailed is smaller than estimates that have been made for Uber’s potential liability if we win the Uber misclassification case.  Lyft has not been in business for as long as Uber, its operations are currently much smaller than Uber’s, and Lyft drivers have not logged nearly as many miles as Uber drivers.  They have also spent far fewer hours logged into Lyft’s app.)

Finally, we note that, as wage and hour employment lawyers, we listen to what concerns our clients bring to us.  Oftentimes, employees feel they have been mistreated but their concerns are about matters that are different from the legal claims we can sue for.  In the litigation we are pursuing against Uber, we hear daily complaints from drivers about how they feel Uber has mistreated them (in addition to the misclassification) – in cutting fares without their input, shortchanging them on pay they are owed, and deactivating them for no reason or no legitimate reason.  We have not been hearing so many concerns from Lyft drivers, which leads us to believe that Lyft is treating its drivers with more respect than Uber is treating its drivers.

Although this difference does not speak to whether either company has rightly or wrongly chosen to classify its drivers as independent contractors instead of employees, it cements our belief that far more Uber drivers than Lyft drivers are anxious for us to continue pursuing these misclassification claims against Uber.  And with the court’s ruling striking down Uber’s arbitration clause and allowing the case to proceed on a class wide basis, we will have the opportunity to do just that.

Shannon Liss-Riordan

Matthew Carlson