Key Takeaways
- Due to claims that it deceived drivers about their prospective profits, Lyft has agreed to pay the FTC $2.1 million.
- Only 20% of drivers made the money advertised by Lyft, which also incorporated tips in hourly rates without providing any explanation, according to the complaint.
- The settlement, which was submitted to a federal court in San Francisco, requires Lyft to make sure that future earnings claims are accurate and to inform drivers of the results.
The massive ride-hailing company Lyft agreed to pay a $2.1 million fine on October 25 in order to resolve claims made by the Federal Trade Commission (FTC) that it had misled drivers about their potential earnings.
Pending court approval, the proposed deal wraps up an FTC inquiry into Lyft’s 2021 and 2022 ads that the agency believes overstated earnings in the face of a driver shortage.
An Overview of the FTC Settlement and Lyft’s Earnings Claim Allegations
The Justice Department’s complaint brought attention to Lyft’s use of hourly earnings data from the top 20% of drivers, which the FTC claimed did not accurately reflect the wages of the majority. For instance, according to Lyft’s own data, the median hourly wage in New Jersey was closer to $25 in 2021, despite the company’s claims that drivers could make up to $34 per hour.
Furthermore, the FTC argued that Lyft included tips in its calculations without disclosing this information to potential drivers, which could have led them to anticipate higher earnings than what was promised. FTC Chair Lina Khan stated that it is unacceptable for corporations to make false statements about earnings and cautioned them of the legal consequences of hiring employees based on false promises.
Interestingly, Lyft was warned by the FTC in 2021, but it allegedly ignored the warning. Lyft accepted the payment without acknowledging any wrongdoing, pledging to be transparent and determined to win back the trust of its drivers. According to a statement from the firm, Lyft agreed to pay the FTC.
A representative went on to say that Lyft prioritizes openness and has implemented policies such as “upfront pay” and a thorough earnings summary, which was introduced in February 2022, to assist drivers in monitoring fare distributions. According to the settlement, Lyft must stop making unsupported earnings claims and make it clear that tips are included in any hourly rates it advertises.
Furthermore, it mandates that Lyft notify drivers of their eligibility for earnings guarantees, stating that if they don’t meet the guaranteed rate, they would only be compensated for the gap between their actual earnings and the guaranteed rate.
The Constant Dedication of Lyft to Rider Accessibility
Separately, Lyft has addressed long-standing concerns from advocacy groups by announcing new features targeted at enhancing accessibility for riders with disabilities.
In order to prevent last-minute cancellations and uncomfortable circumstances for passengers with disabilities, the firm intends to implement a feature that would allow riders to declare when they are traveling with a service animal.
