Lyft to Pay $2 Million to Resolve FTC Suit Over Driver Pay

Lyft Inc. agreed to pay $2.1 million to resolve a lawsuit by the US Federal Trade Commission accusing the ride-hailing company of deceiving drivers about how much they would earn when consumer demand picked up after the pandemic.

The agency alleged the company misled prospective drivers in advertisements about “Earnings Guarantees” that included bonuses on top of regular pay, according to a complaint filed Friday in federal court in San Francisco, where Lyft is based. A subsequent filing shows that Lyft and the FTC agreed to settle the case.

Lyft said in statement that it’s been working to improve driver pay transparency, including launching a feature this month that allows drivers to decide whether to accept a ride request by showing them an estimated hourly pay rate for the ride.

The case is one of many disputes over driver pay involving Lyft and rival Uber Technologies Inc. over the last decade. Rideshare drivers and labor groups have fought for years for higher wages and other benefits for workers, who aren’t considered employees but independent contractors who pay for gas, maintenance and other operating expenses upfront.

In spite of resistance from the rideshare companies in some cases — including threats to pull out of markets entirely — lawmakers in several states have enacted minimum wage standards to guarantee workers a living wage, most recently in Massachusetts.

The FTC alleged that Lyft continued to put out misrepresentations even after the agency sent a notice to the company in October 2021 flagging concerns over “money-making” driver opportunities in web ads, posts on social media and job boards and Lyft’s website.

The agency claimed Lyft’s ads often inflated hourly earnings by more than 20%, and in some cases by more than 30%, of what most drivers would make.

Lyft agreed as part of the proposed settlement that its driver recruitment ads will cite “typical earnings,” the FTC said in a statement.

“It is illegal to lure workers with misleading claims about how much they will earn on the job,” FTC Chair Lina Khan said in the statement.

The suit builds on the work the agency began in 2017, when it brought a case against Uber also alleging deceptive wage claims, which the company settled for $20 million at the time.

A Lyft spokesperson said its $2.1 million settlement will not have a material impact on its third-quarter and 2024 financial results. The amount represents less than 1% of Lyft’s revenue for the quarter ended June.

In a separate joint statement, Khan and FTC Commissioners Rebecca Slaughter and Alvaro Bedoya said that gig companies’ marketing to workers requires “serious scrutiny” as there is information asymmetry on how much workers make, unlike in a traditional job.

Algorithmic-based pay and opaque decisions made by gig firms, such as “arbitrary lockouts and abrupt suspensions,” can undermine a worker’s ability to gauge how much they can earn, the commissioners said, citing a recent Bloomberg News investigation of driver lockouts in New York City.

“It’s critical that this marketing be truthful,” they said. “Americans are making serious life decisions — such as whether to leave a job or forgo an opportunity — and their livelihoods are on the line.”

Photo: A Lyft drivers lounge in San Francisco./Bloomberg