A U.S. district judge rejected a $12.25-million lawsuit settlement between Lyft and its drivers Thursday, saying that the amount offered shortchanges drivers who sought to be treated as employees.
The drivers, whom Lyft classifies as independent contractors, are seeking reimbursement for work-related expenses such as gas and mileage.
In a ruling Thursday, Judge Vince Chhabria said the settlement agreement did "not fall within the range of reasonableness" because the value of the reimbursement claim alone is believed to be more than $126 million.
The settlement included a $12.25-million payout to drivers and changes to Lyft's terms of service to clearly comply with California law governing independent contractors.
The decision means the San Francisco firm and the drivers' attorney, Shannon Liss-Riordan, must now go back to the drawing board.
"We are hopeful this settlement can be improved to meet the judge's concerns," Liss-Riordan said via email. "If not, we look forward to taking this case to trial as well."
Lyft spokeswoman Chelsea Wilson said the company is "evaluating [its] next steps."
Although it's not unusual for judges to reject settlements unless changes are made, labor attorney John Skousen of law firm Fisher & Phillips said this case is unique in that "there was no admission or finding of liability on Lyft's part, and plaintiffs still had the considerable burden to certify and prove their class claims at trial."
In the event that a settlement can't be reached, "they may well go to trial," he said. "And I would not like to be in the plaintiffs' attorney's position, because with class actions it's all or nothing, and if she loses it's going to be in a very big way."