Lyft pays $2.1 million to settle case that ride-hailing service defrauded drivers

SAN FRANCISCO – Lyft is paying $2.1 million to settle a lawsuit accusing the ride-hailing service of exaggerating how much money drivers could make as the company tried to recover from a steep drop in demand during the pandemic.

The settlement resolves a case filed by the U.S. Department of Justice a week ago in federal court in San Francisco on Oct. 25 — the same day that Lyft disclosed that it negotiated settlement terms covering the same issues with the Federal Commission for Trade.

US Magistrate Judge Peter Kang signed an order formalizing the settlement on Thursday, before it was made public on Friday. In addition to having to pay $2.1 million, Lyft was also prohibited from engaging in the deceptive practices reported in the case.

Both the Justice Department and the Federal Trade Commission have been investigating Lyft since they uncovered evidence that it advertised inflated compensation rates as it tried to recruit more drivers as the pandemic eased and demand for rides was stimulated.

The lawsuit alleged that Lyft exaggerated the amounts its drivers could earn in a variety of major U.S. cities from April 2021 to June 2022. Lyft announced that drivers could earn more than $40 an hour in cities like San Francisco, Los Angeles, and Boston, and more than $30 an hour in cities like Atlanta, Dallas, and Miami.

But those figures were based on the earnings of the top 20 percent of Lyft drivers, leaving them out of reach for most others who picked up passengers for the ride-hailing service, the suit claims. up to $44 an hour in San Francisco.

“The Department of Justice will vigorously enforce the law to prevent companies from misleading Americans about their potential earnings in the gig economy,” Principal Deputy Attorney General Brian M. Boynton said in a statement Friday.

Lyft has already changed many of the practices cited in the lawsuit and is now overseen by a CEO, David Risher, who came on board last year.

“We agreed to this settlement because we recognize the importance of transparency in maintaining trust in the communities we serve,” Lyft said last week when it first disclosed the settlement with the Federal Trade Commission.