Lyft pays $2.1 million to settle claims it deceived drivers about earnings potential

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

The agreement 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 Lyft said it had agreed to terms of a settlement revolving around the same issues with the Federal Trade Commission.

U.S. Magistrate Judge Peter Kang signed an order formalizing the settlement Thursday before it was made public Friday. In addition to paying $2.1 million, Lyft was also prohibited from engaging in deceptive practices alleged in the case.

Both the Justice Department and the Federal Trade Commission have been investigating Lyft since uncovering evidence that the company advertised inflated pay rates while trying to recruit more drivers as the pandemic began to ease and demand for ride-hailing services increased.

The lawsuit alleged that Lyft exaggerated the amounts its drivers could earn in various major U.S. cities from April 2021 to June 2022. Drivers advertised by Lyft 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 numbers were based on the incomes of the richest 20% of Lyft drivers, making them unattainable for most others who picked up passengers for the ride-hailing service, the lawsuit alleges. in San Francisco it’s about $44 an hour.

“The Department of Justice will vigorously enforce the law to prevent companies from misleading Americans about their earnings potential in the gig economy,” Principal Deputy Assistant 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 controlled by CEO David Risher, who took over last year.

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