Gig worker misclassification: billion-dollar settlements and what drivers can claim

Updated: December 2025

If you've driven for Uber, Lyft, DoorDash, Instacart, or any other gig platform, your work has probably been undervalued—legally and financially.

In the past two years, rideshare companies have paid more than $500 million in settlements to drivers they misclassified as independent contractors. New York recovered $328 million from Uber and Lyft in the largest wage theft case in state history. Massachusetts secured $175 million and landmark benefits including a $32.50 minimum hourly wage. New Jersey collected $19.4 million from Lyft alone for misclassifying 100,000 drivers.

And in California, a lawsuit representing 250,000 drivers could be worth tens of billions of dollars—the largest wage theft case in American history.

These settlements exist because gig companies have spent years calling their workers "independent contractors" to avoid paying minimum wage, overtime, unemployment insurance, workers' compensation, and other benefits required for employees. The business model works only if companies can shift these costs onto drivers. When workers fight back, the amounts owed are staggering.

If you've driven for a gig platform, you may be owed money. If you're still driving, you have rights you may not know about. This guide explains what misclassification means, who can claim from current settlements, and what's at stake for the future of gig work.

The classification problem

Why it matters

The difference between "employee" and "independent contractor" determines billions of dollars in wages, benefits, and protections:

| Benefit | Employees | Independent contractors | |---------|-----------|------------------------| | Minimum wage | Guaranteed | Not guaranteed | | Overtime pay | Required | Not required | | Unemployment insurance | Covered | Not covered | | Workers' compensation | Covered | Not covered | | Health insurance (employer contribution) | Often provided | Never provided | | Social Security employer contribution | Paid by employer | Paid entirely by worker | | Vehicle expenses | Reimbursable | Worker's responsibility | | Paid sick leave | Required (many states) | Not required | | Right to organize | Protected | Limited |

When Uber or Lyft calls drivers "independent contractors," the company avoids all of these costs. Drivers bear them instead—often without realizing how much they're losing.

The math of misclassification

Consider a driver who works 40 hours per week for Uber:

As an independent contractor (current model):

• •Gross earnings before expenses: varies widely
• •Self-employment tax (15.3%): paid entirely by driver
• •Vehicle expenses: driver's responsibility
• •No paid sick days, no unemployment if deactivated
• •No workers' compensation if injured

As an employee (proper classification):

• •Minimum wage guaranteed ($15-$20/hour in many cities)
• •Overtime after 40 hours
• •Employer pays half of Social Security/Medicare (7.65%)
• •Vehicle expenses reimbursable
• •Unemployment insurance if terminated
• •Workers' compensation for injuries
• •Paid sick leave in many jurisdictions

Research by the Economic Policy Institute estimated that misclassification costs workers 10-30% of their earnings when accounting for unpaid benefits and shifted tax burden.

How companies get away with it

Gig companies defend their classification by pointing to the flexibility drivers have. Drivers set their own hours, use their own vehicles, can work for multiple platforms simultaneously, and can accept or reject rides at will. This sounds like independence.

But this framing ignores how much control the companies actually exercise over their "independent" contractors. The platforms set the rates drivers can charge—drivers cannot negotiate or set their own prices. Algorithms determine which rides drivers receive and can effectively punish drivers who decline too many trips. Companies can "deactivate" drivers at any time, for any reason, with no notice and no recourse—the equivalent of firing an employee, but without unemployment benefits or wrongful termination protections. The apps monitor driver behavior in real time, tracking location, speed, braking patterns, and more. Drivers have no ability to negotiate the terms under which they work.

The core question isn't whether drivers have flexible hours—plenty of employees work flexible schedules. The question is whether drivers are running their own independent businesses or performing work that is controlled by and integral to the platform's business. When a company sets prices, controls customer relationships, determines how work is allocated, and can terminate workers at will, the workers aren't running their own businesses. They're performing a service for someone else's business.

New York: $328 million for stolen wages

What happened

In November 2023, New York Attorney General Letitia James announced the largest wage theft settlement in state history: $328 million from Uber ($290 million) and Lyft ($38 million).

The Attorney General's investigation found that for years, Uber and Lyft improperly deducted taxes and fees from driver pay that should have been charged to passengers:

Uber's scheme (November 2014 - May 2017):

• •Uber deducted sales tax and the Black Car Fund fee from driver earnings
• •These fees should have been paid by riders, not deducted from drivers
• •The practice let Uber advertise lower fares while drivers absorbed the cost
• •Tens of millions of dollars were improperly taken from drivers

Lyft's scheme (October 2015 - July 2017):

• •Lyft deducted an 11.4% "administrative charge" from driver payments
• •This amount equaled sales tax and Black Car Fund fees
• •Like Uber, Lyft shifted costs that should have been charged to riders

Beyond the improper deductions, both companies failed to provide paid sick leave required under New York City and New York State law.

Who is eligible

You may qualify for payment if you completed at least one Uber or Lyft trip in New York State during these periods:

• •Uber drivers: November 10, 2014 through May 22, 2017
• •Lyft drivers: October 11, 2015 through July 31, 2017

More than 100,000 drivers throughout New York are eligible. As of December 2024, over 88,000 claims had been filed.

How to claim

Deadline: January 31, 2025 at 11:59 PM

Where to file:

• •Uber drivers: Visit the Uber settlement portal at the NY Attorney General's website
• •Lyft drivers: Visit the Lyft settlement portal at the NY Attorney General's website
• •Information: ag.ny.gov/lyft-uber-settlement

What you need:

• •Your name and contact information
• •Information about the email address associated with your Uber or Lyft account
• •Basic verification of your driver status

You do not need to calculate how much you're owed—the Attorney General's office and settlement administrator will determine payment amounts based on company records of your driving activity during the covered period.

Benefits going forward

Beyond back pay, the New York settlement established ongoing protections:

Minimum earnings floor: For the first time, drivers outside New York City receive a guaranteed minimum of $26 per hour (adjusted for inflation), measured from dispatch to ride completion.

Paid sick leave: Drivers earn one hour of sick pay for every 30 hours worked, up to 56 hours per year. NYC drivers receive $17 per hour for sick time.

Deactivation appeals: Drivers now have the right to appeal deactivations from the Uber and Lyft platforms—something previously denied to workers classified as contractors.

Massachusetts: $175 million and landmark benefits

The groundbreaking settlement

On June 27, 2024, Massachusetts Attorney General Andrea Campbell announced a settlement requiring Uber and Lyft to pay $175 million and provide unprecedented benefits to drivers.

This settlement was unique because it went beyond back pay to establish ongoing worker protections while allowing drivers to remain classified as independent contractors—a model that could influence gig work nationwide.

Payment breakdown:

• •Uber: $148 million
• •Lyft: $27 million
• •At least $140 million distributed as restitution to current and former drivers

Who is eligible

Most drivers who completed trips for Uber and/or Lyft between July 14, 2020, and July 2, 2024, in Massachusetts are entitled to payment.

Exception: Casual drivers who averaged less than 8 miles per week during this period may not be eligible.

Landmark benefits

The Massachusetts settlement created a model for gig worker protections that preserves contractor status while requiring significant benefits:

Guaranteed minimum pay:

• •$32.50 per hour for time from dispatch to ride completion (effective at settlement)
• •Now $33.48 per hour as of January 1, 2025
• •Adjusted annually for inflation
• •This is "engaged time"—when a driver has a passenger or is en route to pick one up

Paid sick leave:

• •Began November 1, 2024
• •Drivers earn paid sick time based on hours worked
• •Can be requested through the apps

Paid family and medical leave:

• •Automatic stipend to cover the cost of joining Massachusetts' paid family and medical leave program
• •Began January 30, 2025
• •Provides income protection for serious illness, new child, or family care

Health insurance stipend:

• •Began March 1, 2025
• •Drivers working more than 15 hours per week qualify
• •For the first time, hours can be pooled across both Uber and Lyft
• •Stipend helps pay for coverage through the Massachusetts Health Connector

Occupational accident insurance:

• •Up to $1 million in coverage for work-related injuries
• •Paid by the companies, not drivers
• •Available to all active drivers

Multilingual support:

• •In-app chat support in English, Spanish, Portuguese, and French
• •Begins July 2, 2025

How to claim

If you drove in Massachusetts during the covered period, you should have received notification from Uber and/or Lyft about your eligibility.

Visit mass.gov for information on the settlement and restitution process.

New Jersey: $19.4 million from Lyft

The settlement

In early 2025, Lyft agreed to pay $19.4 million to settle claims by the New Jersey Department of Labor and Workforce Development that the company misclassified more than 100,000 drivers as independent contractors.

This followed a 2022 settlement in which Uber paid $100 million to New Jersey after an audit found improper classification of hundreds of thousands of drivers.

New Jersey's aggressive stance

New Jersey has been among the most aggressive states in pursuing gig company misclassification:

2019 audit: The NJ Department of Labor audited Uber and found widespread misclassification dating back years.

2022 Uber settlement: Uber paid $100 million to the Unemployment Trust Fund—meaning the money went to fund unemployment benefits for New Jersey workers, not directly to drivers.

2025 Lyft settlement: The $19.4 million payment represents back unemployment insurance contributions the company should have made.

Ongoing regulation: New Jersey is considering changes to independent contractor rules that would classify more gig workers as employees, potentially affecting Uber, Lyft, DoorDash, and Grubhub.

California: the billion-dollar case

The stakes

The largest gig worker case in history is pending in California, where state agencies and city attorneys allege that Uber and Lyft owe billions of dollars to drivers under state labor law.

The lawsuit alleges violations of California's AB5 law and seeks unpaid minimum wages, overtime pay, expense reimbursement, and other benefits denied to drivers who should have been classified as employees.

The estimated exposure is staggering. Rideshare Drivers United, a driver advocacy group, estimates that drivers with wage claims are owed at least $1.3 billion. Approximately 250,000 drivers may be eligible for restitution. When you account for penalties, interest, and the full scope of denied benefits, total liability could reach tens of billions of dollars—making this potentially the largest wage theft case in American history.

AB5 vs. Proposition 22

California's gig worker battle illustrates the political and legal complexity of classification:

AB5 (2019): California passed Assembly Bill 5, which codified the "ABC test" for determining employee status. Under this test, a worker is presumed to be an employee unless the hiring entity proves three things: that the worker is free from control and direction in performing the work (factor A); that the worker performs work outside the usual course of the company's business (factor B); and that the worker is engaged in an independently established trade or business of the same nature (factor C).

Applying this test, most Uber and Lyft drivers would clearly be employees. Factor B is particularly damning—rideshare is Uber's core business, so drivers are obviously performing work within the usual course of the company's business. And factor A is problematic because drivers are subject to significant company control over pricing, work allocation, and termination.

Proposition 22 (2020): Uber, Lyft, DoorDash, and Instacart spent over $200 million—the most expensive ballot measure campaign in U.S. history—to pass Proposition 22, which exempted app-based drivers from AB5.

Prop 22 provided some benefits (a wage floor, accident insurance, healthcare stipends for qualifying drivers) but far less than employee status would provide.

California Supreme Court (July 2024): On July 25, 2024, the California Supreme Court unanimously upheld Proposition 22 in Castellanos v. State of California, ruling that the measure was constitutional.

The ruling was a major victory for gig companies—but it doesn't resolve the ongoing lawsuit over wages earned before Prop 22 took effect or claims that Prop 22 benefits are insufficient.

Current status

The California case is in mediation as of late 2024, with parties negotiating a potential settlement.

If no settlement is reached, trial is expected in 2026. A trial verdict finding widespread misclassification could result in the largest back-pay award in American labor history.

Drivers who worked in California before November 2020 (when Prop 22 took effect) have the strongest claims, as that period falls entirely under AB5.

Federal law: the DOL rule and its uncertain future

The 2024 independent contractor rule

On January 9, 2024, the Department of Labor announced a new rule for determining whether workers are employees or independent contractors under the Fair Labor Standards Act (FLSA).

The rule, effective March 11, 2024, established a six-factor "economic reality" test that examines the totality of the working relationship. The factors include: opportunity for profit or loss based on managerial skill; investments by the worker and employer; degree of permanence of the relationship; nature and degree of control; extent to which work is integral to the employer's business; and the worker's skill and initiative.

Under this test, many gig workers would likely qualify as employees. Two factors are particularly significant for rideshare drivers. First, companies exercise significant control over how work is performed—they set prices, control customer relationships, determine ride allocation through algorithms, and can terminate drivers at will. Second, drivers are integral to the rideshare business—without drivers, Uber and Lyft have no business. These factors weigh heavily toward employee status.

Current status (2025)

The DOL rule's future is uncertain:

The rule remains in effect: The 2024 rule has not been formally rescinded.

But DOL isn't applying it: In early 2025, the Department of Labor issued a Field Assistance Bulletin instructing investigators not to apply the 2024 rule when determining worker classification. Instead, field staff are using older guidance.

Legal challenges pending: Multiple lawsuits challenge the 2024 rule's validity. The Supreme Court's Loper Bright decision (overturning Chevron deference) means courts will independently evaluate whether the DOL had authority to issue the rule.

Potential rescission: The current administration may formally rescind the 2024 rule through the rulemaking process, though that takes time.

Practical effect: Until formally rescinded, the rule exists but is not being applied by the agency. This creates uncertainty for workers and companies alike.

State-by-state: where drivers have rights

States with strong worker protections

The level of protection gig workers receive varies dramatically depending on where they work. Some states have enacted strong protections or achieved significant settlements; others offer little beyond baseline federal law.

California has the most complex landscape. AB5 creates a strong presumption of employee status under the ABC test, but Proposition 22 exempted app-based rideshare and delivery workers from that law. Drivers who worked before Prop 22 took effect in November 2020 have strong claims under AB5, and the ongoing litigation over that period could result in billions in recovery. The situation remains unsettled, with advocates pushing to overturn or modify Prop 22.

Massachusetts established a model for gig worker protections through its 2024 settlement. Drivers receive a $33.48 per hour minimum wage (as of January 2025), paid sick leave, a health insurance stipend, and occupational accident coverage. The settlement preserves independent contractor status while providing many employee-like benefits—a compromise that other states may emulate.

New York's $328 million settlement created ongoing protections including a $26 per hour minimum for drivers outside New York City (adjusted annually for inflation), paid sick leave, and for the first time, the right to appeal deactivations from the platforms.

New Jersey has pursued gig companies aggressively, recovering $100 million from Uber in 2022 and $19.4 million from Lyft in 2025. The state continues regulatory pressure and is considering changes to independent contractor rules that could affect the entire gig economy.

Washington became a leader when its Supreme Court ruled in 2021 that gig workers can qualify for unemployment benefits. Seattle has passed minimum pay standards for both rideshare and delivery drivers, and the state legislature continues to consider additional protections.

Illinois is emerging as a battleground. Chicago passed a minimum pay ordinance for gig drivers, and the state is investigating classification issues that could lead to enforcement actions or new legislation.

States with limited protections

In Texas, Florida, Georgia, and many other states, gig workers have few specific protections. General employment law applies, but enforcement is limited and there have been few successful actions against gig companies. Workers in these states depend primarily on federal law—which, as discussed above, is currently in flux with the DOL rule unenforced.

Local ordinances

Even where state law is weak, some cities have enacted their own protections. New York City pioneered rideshare driver pay regulation in 2019, becoming the first city in the nation to set minimum earnings standards for drivers. Seattle has enacted minimum pay standards for both rideshare and delivery workers, along with paid sick leave for gig workers. Chicago is implementing minimum earnings standards for drivers in the city.

What you can claim: a checklist

Current settlement claims

New York ($328 million):

• •Deadline: January 31, 2025
• •Uber drivers who drove Nov 2014 - May 2017
• •Lyft drivers who drove Oct 2015 - July 2017
• •File at: ag.ny.gov/lyft-uber-settlement

Massachusetts ($175 million):

• •No filing deadline announced; automatic distribution
• •Uber/Lyft drivers July 2020 - July 2024
• •Info at: mass.gov

What to do if you're still driving

Document your hours:

• •Track time from accepting a ride to completing it ("engaged time")
• •Track total time online, including waiting for rides
• •Note if you're earning below minimum wage for engaged time

Document expenses:

• •Keep receipts for gas, maintenance, car washes
• •Track mileage (business miles are deductible)
• •Save phone bills (you're using your phone for work)

Understand your rights:

• •In some states, you may have claims for minimum wage violations
• •If deactivated, you may have unemployment claims in some states
• •If injured, document the injury and circumstances

Watch for new settlements:

• •Class actions and government enforcement are ongoing
• •New settlements may emerge in other states
• •Sign up for notifications from your state attorney general

If you believe you were misclassified

File a complaint:

• •Federal: Department of Labor Wage and Hour Division (dol.gov/agencies/whd)
• •State: Your state labor department
• •Local: City labor standards office if applicable

Join a driver organization:

• •Rideshare Drivers United (California)
• •New York Taxi Workers Alliance
• •Local driver advocacy groups

Consult an attorney:

• •Employment lawyers often take classification cases on contingency
• •National Employment Law Project (nelp.org) has resources
• •State bar lawyer referral services

The human cost

Driver stories

Maria, New York: "I drove for Uber for three years. I worked 50-60 hours a week. After gas, car payments, insurance, and phone, I was making less than minimum wage. When my car broke down, I couldn't afford to fix it—and suddenly I had no income and no unemployment."

James, California: "I got injured picking up a rider—slipped on ice outside their building. Uber's accident insurance didn't cover it because I wasn't 'in transit.' As an employee, workers' comp would have covered it. Instead, I had medical bills I couldn't pay and couldn't work."

Sandra, Massachusetts: "The new minimum wage is a game-changer. Before the settlement, I had weeks where I made $8-10 per hour after expenses. Now I know I'll make at least $33. That's the difference between making rent and not making rent."

The economic impact

Research has documented the financial harm of misclassification:

Income volatility: Gig workers face dramatic swings in weekly income. A 2019 JPMorgan Chase study found that gig workers' income varied by 30% or more month to month.

Below minimum wage earnings: Multiple studies have found that after expenses, many gig workers earn below minimum wage. A 2020 study of Uber and Lyft drivers found median hourly earnings of $8.55 after expenses—below the federal minimum wage.

No safety net: Without unemployment insurance or workers' compensation, gig workers have no protection when work disappears or they're injured.

Retirement insecurity: Without employer contributions to Social Security or retirement plans, gig workers save less for retirement while paying more in self-employment taxes.

Understanding your pay: what drivers actually earn

The transparency problem

One of the most frustrating aspects of gig work is pay opacity. Uber and Lyft don't show drivers the full fare before they accept a ride. Drivers can't calculate their true hourly earnings without careful tracking.

Here's what to understand about gig worker pay:

Engaged time vs. total time:

• •"Engaged time" = from accepting a ride to dropping off the passenger
• •"Total time" = all time with the app on, including waiting for rides
• •Companies report pay per "engaged" hour, which looks better
• •Real hourly earnings calculated on total time are much lower

The waiting game: In many markets, drivers spend 30-50% of their time waiting for rides. If you earn $25/hour for engaged time but you're only engaged 50% of the time, your real hourly rate is $12.50.

Expense reality: Every study of gig worker earnings must account for expenses that employees don't pay:

| Expense | Typical monthly cost | |---------|---------------------| | Gas | $400-800 | | Vehicle depreciation | $200-500 | | Insurance (rideshare) | $150-300 | | Maintenance/repairs | $100-300 | | Phone/data plan | $50-100 | | Car washes | $30-50 | | Total | $930-2,050/month |

A driver grossing $4,000/month might net only $2,000-3,000 after expenses—before taxes.

The tax burden: Employees split Social Security and Medicare taxes with employers (7.65% each). Independent contractors pay the full 15.3% themselves. On $40,000 in earnings, that's an extra $3,060 in taxes compared to employee status.

How to calculate your real earnings

To understand what you're actually making:

Step 1: Track gross earnings Record total payments from the platform for a defined period (one week or one month).

Step 2: Track all hours Record every hour with the app on, not just engaged time.

Step 3: Subtract expenses Deduct gas, maintenance, insurance, phone, and vehicle wear (IRS allows 67 cents per mile in 2025).

Step 4: Account for taxes Set aside 25-30% for federal, state, and self-employment taxes.

Step 5: Calculate hourly rate Divide net earnings by total hours.

Example:

• •Weekly gross: $1,000
• •Hours online: 50
• •Expenses: $300
• •Tax reserve: $175
• •Net: $525
• •Real hourly rate: $10.50

This is why class actions allege minimum wage violations—many drivers net less than minimum wage when properly accounting for expenses and unpaid waiting time.

Why company pay reports are misleading

Uber and Lyft regularly release statistics claiming drivers earn well above minimum wage. These reports are misleading for several reasons:

They measure the wrong time: Companies report earnings per "engaged hour" (time with a passenger), ignoring unpaid waiting time.

They ignore expenses: Gross pay is meaningless without accounting for the costs of operating a vehicle.

They cherry-pick markets: Companies highlight high-earning markets while ignoring areas where drivers struggle.

They don't account for turnover: The drivers who earn well stay; those who don't quit. Survivor bias skews the data.

Independent research consistently finds lower earnings than company reports. A landmark MIT study (later revised after criticism from Uber) found median profit of $8.55/hour—below federal minimum wage.

The benefits you're missing

What employees receive

When gig companies classify drivers as independent contractors, drivers lose access to valuable benefits:

Workers' compensation: If you're injured on the job as an employee, workers' compensation covers medical bills and provides wage replacement. As a contractor, you're on your own.

Uber and Lyft offer limited "occupational accident insurance," but it's far less comprehensive than workers' comp:

• •Coverage caps that may not cover serious injuries
• •Waiting periods before coverage kicks in
• •Narrow definitions of covered incidents
• •No coverage for injuries during waiting time (between rides)

Unemployment insurance: Employees who lose their jobs through no fault of their own receive unemployment benefits—typically 50% of wages for up to 26 weeks.

Gig workers "deactivated" by platforms receive nothing. No notice, no severance, no unemployment. One bad rating or alleged policy violation, and your income disappears instantly.

Paid sick leave: Many states require employers to provide paid sick leave. Employees can take a sick day without losing income.

Gig workers who don't work don't get paid. Drive with the flu or lose money for your family—those are often the only options.

Health insurance: While employers aren't required to provide health insurance to all employees, many do. And the Affordable Care Act requires large employers to offer affordable coverage.

Gig companies provide no health insurance. Some settlements (like Massachusetts) now require healthcare stipends for qualifying drivers, but these fall far short of employer-provided coverage.

Retirement benefits: Many employers offer 401(k) plans with matching contributions—essentially free money for retirement.

Gig workers must save for retirement entirely on their own, with no employer match.

Expense reimbursement: California law requires employers to reimburse employees for necessary business expenses. An employee using their car for work would be reimbursed for mileage.

Gig workers pay all expenses out of pocket, reducing their effective hourly rate.

The Prop 22 compromise

California's Proposition 22 created a middle ground that provides some benefits while maintaining contractor status:

What Prop 22 provides:

• •Earnings guarantee: 120% of minimum wage for engaged time
• •Healthcare stipend: For drivers averaging 25+ hours/week engaged
• •Accident insurance: Medical costs and lost income for accidents during engaged time
• •Vehicle insurance: If driver doesn't have their own

What Prop 22 doesn't provide:

• •Overtime pay
• •Unemployment insurance
• •True workers' compensation
• •Full expense reimbursement
• •Traditional employer benefits
• •Wage protections for non-engaged time

The Prop 22 benefits are better than nothing but substantially less than full employee status would provide.

The Massachusetts model

The 2024 Massachusetts settlement created perhaps the best benefits package for gig workers while maintaining contractor classification:

Compensation:

• •$33.48/hour minimum (2025) for engaged time
• •Annual inflation adjustments

Healthcare:

• •Health insurance stipend for drivers working 15+ hours/week
• •Hours can be pooled across both Uber and Lyft
• •First such pooling provision in the country

Time off:

• •Paid sick leave accrual
• •Access to state paid family and medical leave program

Protection:

• •Occupational accident insurance (up to $1 million)
• •Deactivation appeal rights
• •Multilingual support

This model demonstrates that meaningful benefits are possible without full employee classification—though critics argue it still falls short of what employees receive.

How companies fight classification

The legal playbook

Gig companies have developed sophisticated strategies to avoid employee classification:

Ballot measures: When California passed AB5 to classify gig workers as employees, companies spent over $200 million on Proposition 22 to create an exception. It was the most expensive ballot measure in U.S. history.

This playbook—bypass the legislature by going directly to voters—has been replicated or attempted in other states.

Litigation: Companies challenge classification rules in court, arguing they exceed regulatory authority or violate constitutional provisions. The current lawsuits against the DOL's 2024 rule follow this pattern.

Lobbying: Gig companies employ armies of lobbyists to influence state and federal legislation. They've successfully blocked or weakened classification reforms in multiple states.

Public relations: Companies conduct surveys showing drivers "prefer" contractor status and fund research highlighting the benefits of flexibility. These campaigns shape public perception and political debate.

Contract design: Companies carefully design driver contracts to include provisions that support contractor classification—the ability to reject rides, set your own hours, work for competitors.

What they don't publicize is that they could provide flexibility and employee benefits. The choice isn't flexibility vs. protection—companies choose to deny protection.

The flexibility argument

The gig industry's primary defense is that drivers want flexibility:

The argument:

• •Drivers set their own schedules
• •They can work for multiple platforms
• •They can reject rides they don't want
• •They're not required to work set hours
• •Employees wouldn't have this freedom

The counterargument:

• •Many employees have flexible schedules
• •Part-time employees retain employee status
• •Flexible scheduling doesn't require contractor status
• •Companies use "flexibility" to avoid costs, not benefit workers
• •Drivers would accept some scheduling structure for benefits

Research shows that while drivers value flexibility, they also want the protections they're denied. Surveys consistently find that drivers want healthcare, unemployment insurance, and expense reimbursement—even if it meant some scheduling requirements.

The choice between flexibility and protection is a false one. Companies could provide both. They choose not to because the current model is more profitable.

Delivery workers: the other half of the gig economy

DoorDash, Instacart, and food delivery

While rideshare drivers receive most media attention, food and grocery delivery workers face the same classification issues—and some of the same settlements:

DoorDash: In 2020, DoorDash paid $2.5 million to settle a Washington D.C. lawsuit alleging the company misled customers about where tips went. The company had used tips to subsidize base pay—meaning drivers received the same amount whether customers tipped or not.

In November 2024, DoorDash agreed to pay $16.75 million to settle a California class action alleging it misclassified drivers and failed to reimburse vehicle expenses.

Instacart: Instacart has faced multiple lawsuits over classification. In 2019, the company reclassified its in-store shoppers from contractors to part-time employees after pressure from labor advocates—but kept delivery drivers as contractors.

A 2020 California lawsuit alleged Instacart owed shoppers unpaid wages and expenses under AB5. The case settled for confidential terms, but Instacart subsequently raised delivery fees to cover increased driver costs.

Grubhub: Grubhub paid $3.5 million in 2022 to settle Massachusetts claims it misclassified drivers. The company has faced similar lawsuits in multiple states.

The delivery driver difference

Delivery workers face some unique challenges compared to rideshare drivers:

Lower pay per trip: Food delivery often pays less per order than rideshare trips, requiring more deliveries to reach the same earnings.

Tip dependency: Delivery workers rely more heavily on tips, which vary dramatically and aren't guaranteed.

Safety risks: Delivery drivers face risks from traffic, weather, and late-night deliveries in unfamiliar areas—often without the safety protections rideshare drivers receive.

Multiple apps, same issues: Many delivery workers use multiple platforms (DoorDash, Uber Eats, Instacart, Grubhub). This diversification provides some security but doesn't address the underlying classification problem.

Amazon Flex drivers

Amazon's delivery network includes thousands of "Flex" drivers who deliver packages as independent contractors:

The model: Flex drivers use their own vehicles to deliver Amazon packages, typically earning $18-25 per hour (gross, before expenses).

Legal challenges: Multiple lawsuits have challenged Flex driver classification. A 2023 settlement required Amazon to pay $8.2 million to California Flex drivers who alleged they were denied expense reimbursement and minimum wage protections.

The Amazon difference: Because Amazon controls delivery routes, time windows, and performance standards, plaintiffs argue Flex drivers are employees despite the "independent" label.

Wrongful deactivation: when platforms fire without cause

The deactivation problem

Unlike employees, gig workers have no right to due process before termination. Platforms can "deactivate" drivers at any time:

Common deactivation reasons:

• •Low ratings (even if unfair or discriminatory)
• •Customer complaints (without investigation)
• •Background check issues (even minor old offenses)
• •"Safety concerns" (vaguely defined)
• •Algorithmic decisions (no human review)

The human cost: Jason Williams drove for Uber for four years in Chicago. In March 2024, he was deactivated after a customer complained he drove unsafely—a complaint he says was fabricated after a fare dispute. With no appeal process, his income disappeared overnight.

"I had a perfect rating. Four years, over 5,000 trips. One complaint and I'm done. No investigation, no hearing, nothing. If I was an employee, they couldn't do that."

Maria Santos, a Lyft driver in San Francisco, was deactivated in 2023 after a background check flagged a 15-year-old misdemeanor she had disclosed when she started. The conviction was expunged, but Lyft's automated system didn't recognize the expungement. It took three months and a lawyer's letter to get reactivated.

Settlement protections

Some settlements now include deactivation protections:

New York settlement:

• •Drivers can appeal deactivations
• •Companies must provide reason for deactivation
• •Appeals process through independent review
• •First such protection for gig workers in New York

Massachusetts settlement:

• •Appeal rights for deactivated drivers
• •Must receive written explanation
• •Right to respond before final decision

California Prop 22:

• •Requires written notice of deactivation
• •Appeal process through arbitration
• •But critics say process still favors companies

What to do if deactivated

Step 1: Document everything

• •Screenshot the deactivation notice
• •Save all communication from the platform
• •Record dates, times, any explanation given
• •Gather evidence contradicting the reason (dash cam footage, messages, ratings history)

Step 2: Appeal immediately

• •Follow the platform's appeal process (usually in-app)
• •Submit detailed response with evidence
• •Be factual, not emotional
• •Request specific review timeline

Step 3: Contact regulators

• •File complaint with state labor department
• •Report to state attorney general
• •Document discrimination if applicable
• •Contact local driver organizations

Step 4: Consider legal action

• •Consult employment attorney
• •Many take deactivation cases on contingency
• •Class actions exist for systematic wrongful deactivation
• •Individual arbitration may be required (check your contract)

Frequently asked questions

General questions

Am I an employee or an independent contractor? Legally, it depends on your state and the specific test applied. Most gig workers are currently classified as independent contractors, but this classification is disputed. Multiple settlements and lawsuits allege this classification is improper.

Why does classification matter? Classification determines your rights to minimum wage, overtime, unemployment insurance, workers' compensation, paid sick leave, expense reimbursement, and other benefits. Contractors receive none of these; employees receive all of them.

Can I sue Uber or Lyft for misclassification? You may have claims, particularly if you worked during periods before recent settlements or in states with strong worker protections. Consult an employment attorney to evaluate your specific situation.

What if I signed a contract saying I'm an independent contractor? A contract doesn't determine your legal classification. If you're actually an employee under the law, a contract saying otherwise is unenforceable. Classification depends on the nature of the work relationship, not what the contract says.

Settlement questions

How much will I receive from the New York settlement? Payment amounts depend on how many trips you completed during the covered period. The settlement administrator calculates individual amounts based on company records. Average payments are expected to range from several hundred to several thousand dollars.

I drove for both Uber and Lyft. Can I claim from both? Yes. Each settlement is separate. If you drove for both companies during the covered periods, you can file claims with both.

What if I don't remember my exact driving dates? You don't need to remember—the companies have records. When you file a claim, the settlement administrator will verify your eligibility using company data.

Do I need a lawyer to file a claim? No. Settlement claims are designed to be filed without legal assistance. Follow the instructions on the settlement website. However, if you have questions or complications, legal aid organizations can help.

Will settlement payments affect my taxes? Settlement payments for back wages are generally taxable income. You'll likely receive a 1099 form and should report the payment on your tax return. Consult a tax professional if you have questions.

Ongoing work questions

Should I stop driving for gig platforms? That's a personal financial decision. The settlements and lawsuits don't prevent you from continuing to work. Understanding your rights helps you make informed decisions about whether gig work is worth it for your situation.

How can I maximize my earnings as a gig worker?

• •Track all expenses carefully for tax deductions
• •Work during peak demand periods (surge pricing)
• •Choose high-value trips when possible
• •Maintain your vehicle to minimize breakdowns
• •Consider multiple platforms to increase opportunities

What if I'm injured while driving? Report the injury immediately to the platform. File a claim under whatever accident insurance the platform provides. If the injury happened during a ride, document everything. Consult an attorney about whether you might have additional claims.

Can I organize with other drivers? Yes, and many drivers do. Driver organizations like Rideshare Drivers United, the New York Taxi Workers Alliance, and local groups advocate for better conditions. The National Labor Relations Act protects some organizing activity, though contractor status complicates traditional union formation.

Timeline: key events in gig worker classification

2013-2015: the early challenges

• •2013: First lawsuits filed challenging Uber driver classification
• •2014: Uber reaches $100 million settlement with California drivers (later reduced)
• •2015: California Labor Commissioner rules Uber drivers are employees in individual case

2016-2019: legal battles intensify

• •2016: Uber settles California and Massachusetts class actions for $100 million
• •2017: Seattle passes law allowing rideshare drivers to bargain collectively (later blocked)
• •2018: California Supreme Court issues Dynamex decision establishing ABC test
• •2019: California passes AB5, codifying ABC test into law

2020-2022: Proposition 22 and response

• •November 2020: California voters approve Proposition 22 exempting gig workers from AB5
• •2021: Alameda County judge rules Prop 22 unconstitutional (later reversed)
• •2022: Uber pays New Jersey $100 million for misclassifying drivers
• •2022: Massachusetts AG sues Uber and Lyft for misclassification

2023-2024: major settlements

• •November 2023: New York announces $328 million Uber/Lyft settlement
• •January 2024: DOL issues new independent contractor rule
• •June 2024: Massachusetts announces $175 million settlement with unprecedented benefits
• •July 2024: California Supreme Court upholds Proposition 22

2025: ongoing developments

• •January 2025: New York settlement claims deadline
• •Early 2025: New Jersey reaches $19.4 million settlement with Lyft
• •February 2025: DOL suspends application of 2024 rule
• •Ongoing: California case proceeds toward potential 2026 trial

International perspective: how other countries treat gig workers

United Kingdom

The UK Supreme Court ruled in February 2021 (Uber BV v. Aslam) that Uber drivers are "workers" (a category between employee and contractor under UK law) entitled to:

• •National minimum wage
• •Paid holiday
• •Protection from discrimination
• •Whistleblower protections

Following the ruling, Uber reclassified 70,000 UK drivers as workers and began providing benefits. This hasn't happened in the United States.

European Union

The EU proposed a Platform Workers Directive in December 2021 that would:

• •Create a presumption of employment for platform workers
• •Require platforms to prove workers are truly independent
• •Apply to an estimated 5.5 million misclassified workers

After years of negotiation, the directive was adopted in 2024 and member states have until 2026 to implement it.

Australia

Australia's Fair Work Commission has issued multiple decisions finding gig workers were employees, not contractors. However, enforcement has been inconsistent and companies have structured operations to avoid employee classification.

Canada

Canadian provinces have varying approaches. Ontario passed legislation specifically excluding gig workers from employee status, while British Columbia has moved toward stronger protections. The patchwork resembles the U.S. state-by-state approach.

What the international experience shows

Countries with stronger labor protections have been more successful at extending those protections to gig workers. The U.S. system—where companies can shop for favorable states and spend hundreds of millions on ballot measures—makes comprehensive reform more difficult.

What comes next

Legal developments to watch

California trial: If the Uber/Lyft case goes to trial in 2026, the verdict could reshape the gig economy nationwide. A finding of widespread misclassification would create pressure in other states.

Federal legislation: The PRO Act, which would make it harder to classify workers as independent contractors, has stalled in Congress but could be revived.

State legislation: Multiple states are considering bills to regulate gig work. New York is considering legislation similar to California's AB5.

Supreme Court: The Court may eventually take a classification case, which could establish nationwide standards.

The gig companies' response

Uber, Lyft, DoorDash, and other platforms continue to argue that drivers prefer contractor status for its flexibility. They point to driver surveys showing many value the ability to set their own hours.

Companies have also proposed "third category" worker status—something between employee and contractor—that would provide some benefits without full employee rights.

Critics argue that flexibility and employee status aren't mutually exclusive. Many employees have flexible schedules. The question is whether companies should bear the costs they currently shift to workers.

What drivers can do

Short term:

• •Claim money from current settlements
• •Document earnings and expenses
• •Know your rights in your state
• •Join driver organizations

Long term:

• •Support legislation for gig worker protections
• •Participate in legal actions when available
• •Organize with other drivers
• •Vote on ballot measures affecting gig work

Resources

Settlement information

• •New York: ag.ny.gov/lyft-uber-settlement
• •Massachusetts: mass.gov (search Uber Lyft settlement)
• •California: ridesharedriverssettlement.com (check for updates)

Government agencies

• •Department of Labor: dol.gov/agencies/whd
• •Your state labor department: varies by state
• •Your state attorney general: naag.org

Driver organizations

• •Rideshare Drivers United: drivers-united.org
• •New York Taxi Workers Alliance: nytwa.org
• •Gig Workers Rising: gigworkersrising.org

Legal resources

• •National Employment Law Project: nelp.org
• •Legal Aid: lsc.gov
• •State bar lawyer referral: varies by state

Research and advocacy

• •Economic Policy Institute: epi.org
• •National Employment Law Project: nelp.org
• •UCLA Labor Center: labor.ucla.edu

Conclusion: the fight for gig worker rights

The gig economy promised flexibility and independence. For millions of workers, it delivered low wages, no benefits, and zero job security. Companies built billion-dollar valuations by shifting costs—healthcare, vehicle expenses, unemployment insurance, retirement savings—onto the workers who generate their revenue.

But the settlements keep coming. New York's $328 million. Massachusetts' $175 million with landmark benefits. New Jersey's enforcement actions. California's pending case that could be worth tens of billions. Each settlement proves what workers have known all along: the independent contractor classification was a legal fiction designed to avoid labor law.

What the settlements mean

These aren't just legal victories—they're acknowledgments that the system was rigged:

Financial recovery: Hundreds of thousands of drivers will receive money owed to them for years of underpayment, improper deductions, and denied benefits.

Ongoing protections: Settlements in Massachusetts and New York established real worker protections: minimum hourly rates, paid sick leave, health insurance stipends, deactivation appeals. These benefits exist because workers organized and government enforced the law.

Legal precedent: Each settlement strengthens the argument that gig workers are employees. Even when companies settle to avoid a verdict, the terms acknowledge that workers deserve more than they've been getting.

Political momentum: Successful enforcement encourages other states to act. Attorneys general see that these cases can be won. Legislators see that reform is possible.

What you can do now

If you have claims: The New York settlement deadline is January 31, 2025. If you drove in New York during the covered periods, file before that date. Don't leave money on the table.

For Massachusetts and other settlements, check eligibility and ensure you're registered for payments. Keep your contact information current so settlement administrators can reach you.

If you're still driving: Track everything. Your hours (total and engaged), your expenses, your earnings. When the next settlement or lawsuit comes—and it will—documentation makes your claim stronger.

Know your state's protections. If you're in Massachusetts, you have minimum wage guarantees and benefits. If you're in California, Prop 22 provides limited protections. If you're in Texas, you have fewer protections but federal law still applies.

Join a driver organization. There's power in collective action. The settlements that exist came from drivers organizing, filing complaints, and demanding better.

For everyone: Support policy reform. Gig worker protections don't happen automatically—they require political pressure. Know where your legislators stand on worker classification issues. Support candidates who support worker rights.

Understand the economics. When you use Uber, Lyft, DoorDash, or any gig platform, know that the low prices are subsidized by workers who often earn below minimum wage after expenses. Consider tipping generously—it may be the only way drivers make a living wage.

The bigger picture

The gig economy classification fight is really about the future of work. As more industries adopt app-based, on-demand models, the question of who bears the costs and risks of work affects everyone.

Companies want flexibility—the ability to scale up and down without the obligations of employment. Workers also want flexibility—but not at the cost of their economic security. The law hasn't kept up with business model innovation, and workers have paid the price.

The settlements and lawsuits are forcing a reckoning. Either gig companies will be required to provide real benefits and protections, or the law will continue to allow the externalization of labor costs onto workers and society.

The outcome depends on continued enforcement, worker organizing, and policy reform. The settlements prove that change is possible—but only if workers claim their rights and demand more.

You're not just an "independent contractor." You're a worker who deserves to be treated like one.

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This guide provides general information about gig worker classification and settlements. It does not constitute legal advice. Employment law varies by state and jurisdiction. Consult with an employment attorney for specific situations.

Sources: NY Attorney General, Mass.gov, Department of Labor, Economic Policy Institute, National Employment Law Project, UCLA Labor Center, UK Supreme Court

Last updated: December 2025