Lyft will pay $2.1 million to resolve allegations it deceived drivers about potential earnings

Lyft is paying $2.1 million to settle a lawsuit that accused the ride-hailing service of exaggerating how much money drivers could make as the company struggled to recover from a sharp drop in demand during the pandemic.

The agreement resolves a lawsuit filed by the U.S. Department of Justice a week ago, on Oct. 25, in San Francisco federal court. Lyft explained It had negotiated the terms of the deal with the Federal Trade Commission, which revolved around the same issues.

U.S. Magistrate Judge Peter Kang signed an order making the agreement official on Thursday before it was made public on Friday. In addition to having to pay $2.1 million, Lyft was also prohibited from engaging in the deceptive practices cited in the lawsuit.

Both the Justice Department and the Federal Trade Commission have been investigating Lyft since uncovering evidence that it was advertising inflated compensation rates as it tried to recruit more drivers as the pandemic began to ease and ride-hailing demand increased.

The lawsuit alleged that Lyft exaggerated the amounts its drivers could earn from April 2021 to June 2022 in several major U.S. cities. Lyft advertises that drivers can earn more than $40 an hour and over 100 in cities like San Francisco, Los Angeles, and Boston. In cities like Atlanta, Dallas and Miami, it’s $30 per hour.

But those figures were based on the earnings of the top 20% of Lyft drivers, making them out of reach for most others picking up passengers for the ride-hailing service, the lawsuit alleged. In San Francisco, it’s about $44 per hour.

“The Justice Department will vigorously enforce the law to prevent companies from misleading Americans about their potential earnings 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 overseen by CEO David Risher, who joined the board last year.

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