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Employee or Independent Contractor? That Is the Question (Part II)

On Behalf of | May 5, 2016 | Business Management, California Law Update, Uncategorized

This is the second in a two-part blog on Cotter v. Lyft, a California case involving misclassification of drivers.  Read about the “whys” of the case in our first post, Employee or Independent Contractor? That Is the Question.

In the settlement agreement, Lyft agreed to pay more than $12 million ($12,250,000 to be exact, for all monetary benefits and payments to the settlement class, fees and expenses, taxes, and so forth), as well as revise its terms of service with drivers, including the following:

  • Lyft will modify the at-will termination provisions in its terms of service to remove Lyft’s ability to deactivate a driver’s account for any reason and to replace those provisions with language detailing specific actions that will constitute a breach of contract by a driver and/or result in termination of the driver’s terms of service;
  • Lyft will modify the arbitration provision in its terms of service to state explicitly that Lyft will pay for the arbitration fees and costs for claims brought by either party based on an alleged employment relationship between Lyft and a driver, Lyft’s deactivation of a driver’s account, termination provisions, or fares or hourly rates;
  • Lyft will create a “favorite driver” option that results in some benefit to drivers who Lyft passengers designate as a “favorite”; and
  • Lyft will modify its smartphone app to provide drivers with additional information about a potential Lyft passenger prior to a driver accepting any ride request from the passenger.

Although Lyft drivers will be able to enjoy improved working conditions under the terms of the settlement agreement, subject to court approval, they will remain independent contractors, not employees.  Moreover, the case will not have any legal impact on other similar lawsuits– think Uber– leaving a great deal of uncertainty as to how the law should treat this growing number of on-demand workers.

Read the full text of the settlement agreement here.

This post was part of a two-part series on Cotter v. Lyft and its final settlement.  You can find the other post by searching our blogs at  If you have any questions about the content of this blog or other business law issues not discussed here, please contact us.

This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

[1] See generally Cotter v. Lyft, Class Action Settlement Agreement and Release, 13-cv-04065-VC (N.D. Cal. Jan. 26, 2016).  Unless otherwise noted, all references to the case are from this citation.