The U.S. Justice Department and the Federal Trade Commission announced that Lyft Inc. will pay $2.1 million to settle a lawsuit that accused the company of inflating driver earnings in its advertisements.
The complaint states that Lyft exaggerated the amounts drivers could make in various major U.S. cities by becoming its employee from April 2021 through June 2022. Starting in 2021, Lyft began to make false and misleading advertising of potential earnings and incentives of rewards to increase its scale of employees for its desire to recover from a steep downturn in demand during the pandemic.
The company promised over $40 per hour in major cities such as San Francisco, Los Angeles and Boston and over $30 per hour for drivers working in cities such as Atlanta, Dallas and Miami.
The figures presented were based on earnings from top Lyft drivers in major cities who represent the top 20% of earners — making such wages unattainable for drivers nationwide. In October 2021, Lyft allegedly continued its marketing and received a Notice of Penalty Offenses from the U.S. District Court for the Northern District of California regarding its unlawful marketing, which it disregarded.
The complaint accused Lyft of encouraging drivers to offer more rides by promoting the “earnings guarantee,” which promised a set amount of pay for drivers if they completed a specific number of rides within a certain time frame.
However, these guarantees were not disclosed in the contract. Drivers were paid only the difference between their regular earnings for the rides they completed and Lyft’s advertised guaranteed amount, rather than receiving the full guaranteed amount on top of their earnings for completing the specified number of rides.
In November 2023, New York Attorney General Letitia James announced a $328 million penalty taken from Uber Technologies Inc. and Lyft for taking earnings from drivers, such as deducted sales taxes and Black Car Fund fees from drivers’ paychecks, which could have been paid by passengers. The company also failed to provide drivers with paid sick days, which are available to employees under New York City and New York State Law.
Both Uber and Lyft have been accused of snubbing drivers of pay and benefits despite drivers working long hours in challenging weather or conditions.
“These drivers overwhelmingly come from immigrant communities and rely on these jobs to provide for their families,” James said in a press release. “These settlements will ensure they finally get what they have rightfully earned and are owed under the law.”
