SAN FRANCISCO (Legal Newsline) – A federal judge has rejected a $12.25 million settlement between the ride-sharing service Lyft and its drivers, saying it doesn't pay the plaintiffs enough.
U.S. District Judge Vince Chhabria, of the Northern District of California, ruled on April 7 that the settlement was inadequate. The two sides will need to craft a new agreement that addresses his concern if they want to put an end to a lawsuit that alleged drivers were misclassified as independent contractors instead of employees.
Richard J. Reibstein, a partner at Pepper Hamilton, predicted the decision in an interview before Chhabria's decision came down.
“The most likely result is that the court will approve the settlement only after modifications are made, particularly in the area of how much money the class will receive,” he said.
The proposed settlement only pays the class members less than 10% of what they could recover if successful in court, and such a recovery may be regarded as wholly inadequate by the court, Reibstein said.
Uber is facing a similar lawsuit over how it classifies its drivers, with a trial scheduled for June.
Lyft lost a key motion in March after Lyft sought to dismiss the class action lawsuit. Lyft’s motion was based on its argument that the drivers are independent contractors.
However, the court held that because some facts supported IC status while other facts supported employee status, the issue of the drivers’ status as either independent contractors or employees was an issue of fact, not law, and would have to be decided by a jury.
According to Reibstein, though, the objection to the settlement filed by the Teamsters Union had no chance of approval by Chhabria.
“The Teamsters objection to the proposed settlement based on their argument that the drivers are independent contractors is being made in the wrong forum,” he said.
“If they believe that the drivers are employees and not independent contractors, they can proceed before the National Labor Relations Board.”
One of the settlement terms was payment of $12.25 million to the drivers and their counsel, who will be paid 30 percent of the proceeds. Under the settlement, the average payment to drivers would have been less than $1,000 per driver, which is to cover their out-of-pocket car expenses, allegedly unpaid tips and any unpaid overtime and minimum wages.