Ride-hailing company Lyft Inc. has agreed to pay $2.1 million to settle a lawsuit brought against it by the US Federal Trade Commission (FTC) over claims that the company deceived drivers about their earnings. The FTC alleged that Lyft misled prospective drivers in advertisements about “Earnings Guarantees,” which included bonuses on top of regular pay. The agency claimed that 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 has agreed that its driver recruitment ads will now cite “typical earnings” as part of the proposed settlement.
Lyft said in a statement that it had 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 $2.1 million settlement will not have a material impact on Lyft’s third-quarter and 2024 financial results, according to a Lyft spokesperson. The amount represents less than 1% of Lyft’s revenue for the quarter ended June.
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.
Lyft’s settlement with the FTC comes 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 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.
In a joint statement, FTC Chair Lina Khan and 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. They added that 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.
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