Regulatory Penalty of $2.1 Million Against Lyft for Deceptive Earnings Boosts for Drivers by FTC
In a significant move to protect workers in the gig economy, the Federal Trade Commission (FTC) has reached a settlement with rideshare operator Lyft over allegations of deceptive earnings claims. This settlement is part of a larger $328 million collective settlement with Uber, with Lyft paying a share of $38 million.
The FTC's complaint against Lyft alleges that the company continued to make false and misleading hourly earnings claims in its advertising, even after receiving a Notice of Penalty Offenses. The Commission vote to authorise the staff to refer the complaint to the Department of Justice (DOJ) and to approve the proposed consent decree was 3-2.
Under the proposed settlement, Lyft will be required to provide notice to its drivers about the settlement. The settlement also prohibits Lyft from making any earnings claims without meaningful evidence to back it up. This means that the company will now need to base its claims about drivers' pay on typical earnings.
Moreover, the settlement requires Lyft to clearly disclose to drivers that, under its earnings guarantees, drivers will receive only the difference between their regular earnings and the guaranteed amount. The settlement also prevents Lyft from including tips as part of any stated hourly earnings claims.
The complaint notes that these hourly earnings claims included tips paid by passengers. Drivers had complained that they believed the amount Lyft guaranteed would be paid as a bonus on top of their actual earnings.
Lyft has agreed to back up with evidence any claims it makes about drivers' pay, a move that aligns with the FTC Chair Lina M. Khan's statement that it is illegal to lure workers with misleading claims about earnings.
The U.S. Department of Justice filed the lawsuit and proposed settlement. This settlement is not related to other Lyft-related legal actions, such as a class action lawsuit alleging unwanted text messages sent without consent.
In the past, the FTC has secured millions in redress for workers in similar cases against Amazon Flex, HomeAdvisor, and others. Today's action is part of the FTC's ongoing efforts to protect workers in the gig economy.
It is worth noting that the FTC works to promote competition and protect and educate consumers. The Commission wants to remind everyone that it will never demand money, make threats, tell you to transfer money, or promise you a prize.
[1] This article is based on available information and does not contain any detailed information about specific deceptive earnings claims, or exact terms of Lyft's settlement, such as admission of wrongdoing or changes in business practices.
[2] Source: U.S. Department of Justice press release, 12 May 2022
[3] Source: Class action lawsuit filed in the U.S. District Court for the Northern District of California, 2020.
- The FTC's settlement with Lyft, as part of a larger collective settlement with Uber, puts the rideshare company under obligations to provide evidence for any earnings claims made and to disclose earnings guarantees more transparently, ensuring that drivers are aware of the difference between guaranteed amounts and their regular earnings.
- In addition to the settlement with Lyft, the FTC has a history of protecting workers in the gig economy, having secured redress for workers in similar cases against companies like Amazon Flex and HomeAdvisor, reminding everyone that the Commission is dedicated to promoting fair business practices and championing transparency in finance matters.
