4 Most Common Grounds

The rise of the gig economy has created a level of convenience not previously experienced. It has also generated a significant volume of complex litigation, particularly in California, involving major rideshare firms like Lyft. California has become a major center for these lawsuits as both drivers and passengers challenge the company’s operating model and its liability framework.

What are the most common areas of legal dispute? The legal actions against Lyft in California are generally grouped into four broad areas. These include catastrophic personal injury claims arising from vehicle collisions, allegations of misconduct by drivers, and broader labor rights disputes that involve misclassification of drivers and subsequent wage theft claims. The resulting litigation landscape has become highly contentious.

These are the most critical issues essential to understanding when evaluating Lyft’s potential liability or tracing the development of legislation for gig-economy giants. Let us examine each one in detail.

Ground 1: Traffic Accidents (Negligence and Liability)

The primary issue for any plaintiff injured in a Lyft-related accident, whether a passenger, pedestrian, or third-party driver, is determining which party is liable for negligence, as this dictates which insurance coverage applies. This creates an insurance framework in which Lyft’s commercial policy becomes primary during Period 2 (en route to pickup) and Period 3 (with a passenger). This shift of the financial responsibility from the frequently insufficient individual policy of the driver to the transportation network company (TNC) corporate coverage is critical to the victims who pursue severe personal injury claims.

Moreover, the legal protection of this financial security can be ensured through state legislation, specifically Assembly Bill 2293 (AB 2293). This law requires all institutions to have at least $1 million in third-party liability insurance during Periods 2 and 3, applicable to Lyft and other TNCs. This is an important policy, much more than the meager minimum personal auto insurance required by law. It is sufficient to pay the full cost of huge medical expenses, lost earnings, and pain and suffering.

The policy also includes a maximum of $1 million in uninsured/underinsured motorist (UM/UIM) coverage. This coverage protects passengers in the event of an accident caused by a third-party driver who is unable to pay the damages suffered by the passenger. As a result, the crucial point is that the injured parties need to carefully record the trip status at the time of the accident. This is because the primary goal of the case is to demonstrate the successful application of this $1 million commercial policy.

These insurance policies have a significant impact on the litigation process in particular accident scenarios. For example, in the case of a passenger who was injured during a ride (Period 3), it is easy to access the entire policy amount of $1 million, which would simplify the recovery process regardless of which driver was at fault: a Lyft driver or the other motorist. On the other hand, a pedestrian who is hit by a Lyft driver or a motorist who is involved in an accident due to the Lyft driver's careless action, like an illegal U-turn (assuming Periods 2 or 3 apply), will also receive the $1 million coverage limit of the TNC. The limit offered by AB 2293 ensures that even catastrophic injuries resulting from a multifaceted traffic failure will receive the necessary financial support. This allows victims to pursue comprehensive justice against the driver while guaranteeing payment in accordance with the policy required by Lyft.

Ground 2: Sexual Assault and Physical Attacks

The most difficult and sensitive legal issues are lawsuits based on sexual assault and physical attacks initiated by Lyft drivers. These instances shift the emphasis from mere negligence of motor vehicles to the presence of institutional failure, specifically the doubt surrounding Lyft's organization's ability to screen and monitor its independent contractors. The claims made by the victims are typically not covered under conventional auto insurance policies, but rather under direct liability theories. These theories allege that the company's negligence caused the circumstances under which the assault occurred. These claims typically fall outside standard auto-insurance frameworks and rely instead on direct liability theories against the company.

The legal theory most commonly used is:

• Negligent hiring
• Retention
• Supervision

Plaintiffs could argue that Lyft failed to exercise reasonable care when conducting its screening. This failure could be due to using insufficient background checks or, more importantly, that the company was aware of complaints or red flags regarding a driver's behavior but chose not to remove them from the platform (negligent retention). Cases in these lawsuits often argue that the company prioritizes rapid driver recruitment over the well-being of the population. This act, therefore, caused the predictable harm of placing dangerous individuals on the road.

A second and more future-oriented theory is that of product liability or negligent design of the safety system. Advocates and plaintiffs argue that, given the known risks revealed in Lyft's own safety reports (which documented thousands of sexual assault incidents), the company has a duty to implement design-based safety features. These include:

• Mandated in-car cameras
• Physical barriers
• Real-time biometric driver monitoring

Failure to implement these easily accessible technologies, despite the history of attacks being known, constitutes a failure of duty, which leads to an ongoing safety risk.

Further, the Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA), a federal law passed in March 2022, removed a significant procedural barrier to sexual assault survivors. This act invalidated pre-dispute arbitration contracts on sexual assault or harassment. It, therefore, means that, unlike most personal injury cases that Lyft and other TNCs strive to sweep in secret, private arbitration, victims of sexual assault now have the right to decide to go to open court, where more people can scrutinize it, and a jury trial is more likely. This is a significant triumph for survivor rights in holding TNCs accountable.

Ground 3: Driver Misclassification

The categorization of employees in the gig economy is one of the central regulatory issues, which constitutes the third ground for legal action. The primary dispute in this category is whether drivers for companies like Uber and Lyft are employees or independent contractors. This fight became central in California when, in 2020, Assembly Bill 5 (AB 5) required the use of the strict ABC test to define the status of workers. This was seen as one of the most rigorous tests in the country, making it difficult to label platform drivers as independent contractors. This threatened to compel the industry to offer its drivers the traditional benefits of employment, including minimum wage, overtime, and workers' compensation.

As a direct response to AB 5, app-based businesses proposed and won the ballot measure, Proposition 22, in November 2020. That particular move created an exemption for app-based drivers, who could continue to be independent contractors with a limited number of additional benefits, including:

• A minimum wage — 120% of the minimum wage only during engaged time
• A health insurance stipend — When they met high-hour thresholds
• Occupational accident insurance

The entire project was a costly, calculated attempt to circumvent the requirements of AB 5 in the law and establish a highly adaptable labor model.

Castellanos v. The State of California was the immediate constitutional challenge to the law in the courts, which led to the landmark case regarding the constitutional validity of Proposition 22. The main legal case against Proposition 22 was that it illegally usurped the constitutional authority of the California Legislature to create and administer a comprehensive workers' compensation system. This is power expressly bestowed on the Legislature by the state Constitution and is deemed to be unlimited by any other provision of the Constitution. Another claim made by petitioners was that the initiative violated the single-subject rule and denied the Legislature the right to permit collective bargaining in the future.

The subsequent legal process was challenging. However, in a significant victory for the gig companies, the California Supreme Court unanimously upheld the constitutionality of Proposition 22 in July 2024. The court notably stated that the plenary authority given to the Legislature in workers' compensation is not independent. That is, the electorate still has the right to create legislation on the same issue in the initiative process. This latter ruling successfully balances the gig work model in California, solidifying the status of app-based drivers as independent contractors who do not undergo the ABC test. Although the decision establishes regulatory certainty, it has also set a powerful precedent.

Ground 4: Compensation and Wage Theft

Wage theft in the gig economy refers to practices that prevent workers from receiving legally or contractually owed compensation. In the case of rideshare companies like Lyft, the accusations are mainly centered around the following two areas:

• Misclassification — By classifying drivers as independent contractors instead of employees, companies deprive them of the legally required minimum wage, overtime compensation, reimbursement of expenses like gas and maintenance, and other benefits, including paid sick leave.
• Algorithmic skimming and hidden deductions or commissions — These are opaque pricing schemes and algorithms, which deduct charges, taxes, or company commissions directly from the driver-paying passenger fare. These systems aim to lower their promised commissions effectively.

Numerous regulatory actions and lawsuits have alleged improper compensation practices by Lyft. These are the arguments on the operational structure and payment practices in the company:

• Systematic misclassification — The app dictates prices to drivers (setting prices, deactivation, acceptance rates, among others), which means that the relationships between the former and the latter are based on an employer-employee relationship, rather than a typical contractor. This business control contravenes the state-level ABC tests, which are intended to provide workers with fundamental labor rights.
• Illegal deductions — Lyft has faced allegations of improperly deducting state sales taxes and specific regulatory fees, for example, the Black Car Fund fees in New York, directly from driver income, even though these fees were intended to be billed to the passenger. This practice blatantly breaches the state labor laws regarding the calculation of gross and net wages to be paid.
• Earnings misstatement — Regulators have discovered that Lyft deployed deceptive advertisements to attract drivers. Examples include using figures that only cite the top earners or incorporating customer tips into approximate hourly pay. This created a false impression of likely income. This leads to penalties for deceptive marketing practices and contributes to the overall calculation of harm.
• Denial of sick leave and benefits — The company does not offer any mandatory sick leave, health benefits, or contributions to social safety nets, including Social Security, Medicare, or unemployment insurance, by upholding the contractor's status. This is a refusal to pay benefits to employees as mandated by law, which adds to the total unpaid compensation owed to drivers.

The alleged cases of wage theft have had profound financial and operational effects on the company. In the New York Settlement in 2023, Lyft (and Uber) paid a joint settlement of $328 million. This award addressed allegations of non-payment of wages and failure to provide paid sick leave. Lyft's share was $38 million. The settlement stipulates a minimum pay for drivers outside NYC and requires the company to offer more definitive compensation packages.

In 2024, the FTC (Federal Trade Commission) fined Lyft $2.1 million for misrepresenting the earnings of drivers in its ads to recruit drivers. The settlement required Lyft to pay claims based on the average amounts of earnings, provide these claims with appropriate evidence, and finally disclose the terms of any earnings guarantees.

These settlements support the stance that the old compensation models and driver classifications on the platforms constituted illegal wage theft, in accordance with existing labor regulations.

What Do These Lawsuits Have in Common?

A review of civil suits against Lyft, like personal injuries, sexual assault, and gargantuan wage and hour lawsuits, can be summarized as a corporate approach of cutting overhead to increase the number of riders at any cost. This generalization of speedy expansion is translated into institutional negligence, which has become the foundation of most liability claims. Lyft records reveal thousands of safety incidents, but critics and lawsuits claim Lyft made a strategic decision to maintain lax screening procedures and poor surveillance systems. This corporate conduct enables personnel to drive unsafely. It even facilitates the systematic denial of employee rights, ultimately prioritizing a higher financial result over the safety and well-being of both passengers and drivers.

This trend of focusing on financial indicators requires a robust legal framework to shield the business against liability that may be incurred. As such, Lyft has consistently deployed the “platform” defense, which states that it is just a neutral technology service provider and not a regulated transportation company or an employer. This legal classification of drivers as independent contractors is the underlying tool that enables Lyft to evade liability. Since Lyft does not establish an employment relationship, it asserts its lack of vicarious liability regarding the acts of drivers. This is a significant defense in accident and assault cases. Furthermore, Lyft is not required to pay minimum wage, overtime, or benefits, which are the core of major labor misclassification cases worldwide.

The ability to successfully challenge the “platform” defense and demonstrate institutional negligence is heavily dependent on obtaining crucial data, leading to the shared theme of Information asymmetry. Lyft has a monopoly on almost all operational indicators, including accurate GPS records, internal complaint histories, driver ratings, and pay/bonus-setting algorithms. This control poses a significant challenge to the plaintiffs. Without this granular information, it becomes almost impossible to estimate unpaid wages accurately or to prove that the company had specific, actionable knowledge of a driver's dangerous history and yet ignored it. Thus, one of the most significant elements of almost any court action against Lyft is a complex and protracted legal struggle during the discovery phase, as plaintiffs struggle to force the release of the corporation's proprietary internal data, which they can use against it.

As a plaintiff, you should expect intense negotiation driven by the discovery phase. Lyft does not want to set damaging legal precedents and is often inclined to settle claims out of court, particularly in cases where the plaintiff successfully forces the company to disclose critical internal information. Although a trial is still possible, most civil cases are resolved through confidential settlement agreements, which can be initiated at any stage before a verdict is reached.

Find a Personal Injury Attorney Near Me

The legal landscape in California clearly shows that Lyft’s foundational business model is under intense scrutiny. The four most recurring reasons for suits, including the dispute over driver categorization and the revelation of systemic wage fraud, the necessity to make it available, and the response to essential safety failures, are a necessary fight for corporate responsibility in the gig economy. The courts are in the process of redefining the rights of both the drivers and passengers.

If you or a loved one has suffered a personal injury due to a collision or an unsafe situation involving a Lyft driver or a vehicle, your right to justice must be protected. Contact the Los Angeles Personal Injury Attorney to pursue the compensation and recovery you deserve. While no attorney can guarantee the outcome of any case, timely legal representation ensures that your rights are fully protected. Contact us at 424-231-2013 for further assistance.