Lyft settlement with drivers still in play as judge asks questions

SAN FRANCISCO (Reuters) - A proposed settlement between Lyft and its drivers came under close scrutiny from the U.S. judge overseeing it on Thursday, an indication that the agreement that maintains drivers as independent contractors is still in play.

Maya Jackson, a Lyft driver from Sacramento, navigates a Lyft app on a smartphone during a photo opportunity in San Francisco, California February 3, 2016. REUTERS/Stephen Lam

U.S. District Judge Vince Chhabria in San Francisco issued several written questions about the deal, including some on the key issue of whether drivers for Lyft should be independent workers or employees.

Lyft and larger rival Uber face separate lawsuits brought on behalf of drivers who contend they are employees and entitled to reimbursement for expenses including gas and vehicle maintenance. The drivers currently pay those costs themselves.

The issue of employment status is a critical one for the so-called sharing economy technology companies.

The planned Lyft settlement, filed last month, provides for Lyft to pay $12.25 million, as well as give drivers notice if they are to be deactivated from the platform and other benefits.

Chhabria, who must approve the proposed class action settlement, noted that the deal would move drivers closer to independent contractor status.

“If that is correct,” he wrote, “is this aspect of the settlement agreement contrary to the original goal of the lawsuit?”

Chhabria directed both sides to answer his questions in writing, and a hearing is scheduled for March.

The Uber and Lyft cases have been closely followed because a determination that the workers are employees rather than contractors could affect the valuations for other startups that rely on large networks of individuals to provide rides, clean houses and other services.

While the settlement will involve some costs for Lyft, classifying drivers as employees would have been much more expensive and complicated.

Chhabria also asked if other “sharing economy” companies classify their workers as employees, and if “there any factors specific to Lyft’s business model that preclude it from classifying drivers as employees.”

One attorney for drivers had said last month that the deal should be approved, partly because an arbitration provision would make it difficult for Lyft drivers to ultimately prevail as a group.

However Chhabria questioned that assertion, given that Lyft lawyers had previously said the company would waive its right to assert arbitration.

“Those are excellent questions the court has asked, and we will provide the answers,” said Shannon Liss-Riordan, an attorney for the drivers.

A Lyft representative could not immediately be reached for comment.

Reporting by Dan Levine; Editing by Frances Kerry