Lyft may have to pay more than $12.25 million to settle driver classification suit

A San Francisco District judge threw out a $12.25 million settlement agreement between Lyft and a group of drivers who contended they had been misclassified as independent contractors rather than employees, saying it’s not high enough.

If the terms had been accepted by the judge, Vince Chhabria, contractors who drove on the Lyft platform for more than 30 hours would be eligible to receive an average of $1,000 each but would still be considered independent contractors. But in February, Chhabria questioned whether that was a sufficiently substantial amount of money to be awarded to the plaintiffs.

“We’re disappointed in the preliminary ruling,” a Lyft spokesperson said in a statement. “We believe we reached a fair agreement with the plaintiffs and are currently evaluating our next steps.”

The plaintiffs’ attorney, Shannon Liss-Riordan, says she hopes “the settlement can be improved to meet the judge’s concerns.”

“If not, we look forward to taking this case to trial as well,” Liss-Riordan, who is also representing drivers in a class-action suit against Uber, told Re/code.

If the case goes to trial, Lyft, like Uber, will have to defend its position that Lyft drivers are independent contractors, not employees, and as such do not qualify for employer-sponsored benefits. The primary question at the heart of these cases is how much control Lyft and Uber exert over their drivers.

A ruling in favor of the drivers would likely cause Lyft and Uber to significantly alter their respective business models and could require the companies to either significantly reduce their driver pool or scale down other aspects of their operations to subsidize drivers’ benefits and wages.

Aside from the monetary terms, the settlement also required that Lyft give fair warning to drivers before deactivating them and placed limits on reasons why the company could deactivate drivers.

This article originally appeared on Recode.net.