SAN FRANCISCO – A $27 million settlement of a class-action lawsuit filed against Lyft Inc. concerning the independent-contractor status of its drivers was granted preliminary approval in a June 23 order entered by Judge Vince Chhabria in the U.S. District Court for the Northern District of California.

In April, Chhabria denied approval of a settlement that would have required Lyft to pay $12.25 million to settle the lawsuit. The judge said in the June 23 order that “the new settlement is fair, reasonable and adequate.”

Plaintiff attorney Shannon Liss-Riordan, who is a partner at Lichten & Liss-Riordan PC, said the agreement that was rejected by Chhabria in April was negotiated using data that was almost a year old by the time the plaintiffs got to court to seek preliminary approval.

“We did not expect it would take so long to get to court, nor did we expect that the company would experience such explosive growth during those last months before the hearing,” Liss-Riordan told the Northern California Record. “In light of these developments, the court sent us back to look at the case based on the new data. We did that and arrived at the $27 million agreement.”

Although she thinks the plaintiffs have strong arguments that the Lyft drivers have been misclassified, Liss-Riordan said the courts have put many hurdles in the way of employees attempting to enforce these laws, such as arbitration clauses that prevent the ability to sue on behalf of a class.

“Whether we would be able to surmount that hurdle was one of the larger uncertainties we faced,” Liss-Riordan said. “The settlement will provide benefits to drivers, both in terms of cash payments, and improvements to their working conditions. We believed this settlement was a fair resolution.”

Now that preliminary approval of the $27 million deal has been granted, Liss-Riordan said notices will go out to class members, who will have an opportunity to claim their share of the settlement, object or opt out. If the court approves the settlement following a final hearing, payments will be sent to class members.

Liss-Riordan said she does not believe this particular settlement will have implications for the larger question of whether companies are abusing the independent contractor label to avoid labor costs, as the issue will continue to play out in the courts and in arbitration.

“It typically takes many years, and a patchwork of decisions, before major issues get sorted out in the courts,” Liss-Riordan said. “Meanwhile, parties have to look at each case in front of them and weigh the risks and benefits in deciding what to do.”

What the settlement will do for Lyft drivers, Liss-Riordan said, is give them more job security and better ability to challenge pay-related issues, as well as cash in their pockets, especially for the drivers who have spent a significant amount of time driving for Lyft.

Lyft spokesman Chelsea Wilson said in a statement that the company was pleased with the preliminary approval of the settlement, “which maintains the classification of drivers as independent contractors and brings us one step closer to a final resolution.”

“This settlement will preserve the flexibility of drivers to choose when, where and for how long they drive on the platform,” the statement said.

Liss-Riordan said there are a number of cases working their way through the courts now that are addressing whether so-called “sharing economy” companies need to comply with labor and employment laws. She said “companies that are playing fast and loose with the rules are taking a big legal risk, not to mention paying large legal fees to defend their actions.”

However, Liss-Riordan said companies that have decided to reclassify their workers as employees “show that it is possible to run these kinds of businesses and be in compliance with the law.”

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