Ride-hailing start-up Lyft this week settled a proposed class-action lawsuit. The settlement offered drivers some concessions, but stopped short of reclassifying the drivers as employees.
Identifying drivers as employees is a key sticking point for ride-hailing companies including Uber. The new crop of transportation companies recruit freelance drivers, essentially, who don't enjoy traditional workplace benefits such as health-care and work-related expenses. And despite Lyft's decision to settle on Monday, experts say the broader issue of potentially reclassifying drivers and workplace protections is far from settled.
"None of these companies are going to shift the classification until they are forced to," says Catherine Ruckelshaus, general counsel at the National Employment Law Project, an advocacy group. "It's too lucrative of an arrangement for the companies."
The Lyft deal still needs to be approved by a federal court in the northern district of California.
Both the Uber and Lyft class-action suits were filed on behalf of drivers, who want to be considered employees. The reclassification would mean employee perks including benefits and reimbursement for related expenses. The reclassification of drivers as employees would also mean big tax implications for the start-ups.
Uber's class-action suit is set for trial in June in California. Attorney Shannon Liss-Riordan, partner at Boston-based Lichten & Liss-Riordan, is representing drivers in both cases, and said the Lyft case was smaller in scale and impacted fewer drivers than the pending Uber class-action suit.
"We have been contacted by thousands of drivers who are very upset with Uber, but I've only received a trickling of concerns or complaints about Lyft," Liss-Riordan said in an email message to CNBC.
Uber declined to comment for this story.
According to Lyft's settlement, the company will pay $12.25 million and make changes to its product and terms of service with drivers. Lyft no longer will be able to deactivate drivers' accounts for any reason. And Lyft will pay for arbitration fees and certain costs for a range of arbitration claims initiated by the company or drivers.
"We believe it is important to preserve the flexibility drivers cherish while also strengthening their safety net," said Kristin Sverchek, general counsel at Lyft, in a prepared statement.
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