Proposed court order requires Lyft to have evidence to back up earnings claims, clearly notify drivers about terms of incentives, pay more than $2 million civil penalty

October 26, 2024 - The FTC is taking action against rideshare operator Lyft for making deceptive earnings claims about how much money drivers could expect to make per hour and how much they could earn in special incentives.

Lyft has agreed to a proposed settlement that would require its claims about drivers’ pay to be based on typical earnings. In addition, Lyft has agreed to back up with evidence any claims it makes about drivers’ pay, clearly notify drivers about the terms of its “earnings guarantee” offers, and pay a $2.1 million civil penalty.

The U.S. Department of Justice filed the lawsuit and proposed settlement upon notification and referral from the FTC.

“It is illegal to lure workers with misleading claims about how much they will earn on the job,” said FTC Chair Lina M. Khan. “The FTC will keep using all its tools to hold businesses accountable when they violate the law and exploit American workers.”

The complaint against Lyft alleges that as demand for rideshare services increased in 2021 and 2022, Lyft made numerous false and misleading claims in its advertising and marketing about how much money consumers could make if they chose to drive for Lyft.

Ads for Lyft advertised that drivers around the country could make specific hourly amounts. For example, potential drivers in Atlanta were offered up to $33 an hour, potential drivers in Portland were offered $41 an hour and potential drivers in Los Angeles were offered up to $43 an hour. Lyft failed to disclose that these amounts did not represent the income an average driver could expect to earn, but instead were based on the earnings of the top one-fifth of drivers. The complaint notes that these figures overinflated the actual earnings achieved by most drivers by as much as 30%.

In addition, the complaint notes that the hourly earnings claims Lyft made in its ads included tips paid by passengers, even though many drivers would assume any tips they received would be in addition to an hourly pay figure.

In its advertisements, Lyft also tried to entice drivers by touting “earnings guarantees,” which supposedly guaranteed that drivers would be paid a set amount if they completed a specific number of rides in a certain time. For example, one guarantee promised drivers they would make $975 if they completed 45 rides in a weekend. But these guarantees did not clearly disclose that drivers were only paid the difference between what they actually earned, and Lyft’s advertised guaranteed amount. Drivers complained to the company in large numbers that they believed the amount Lyft guaranteed would be paid as a bonus on top of whatever pay they received for completing the assigned number of rides.

One driver complained to the FTC that: “…This [is] unacceptable and not fair. . . . [Lyft] is misleading their drivers. [Lyft] should pay their driver[s] as stated, it shows I completed the task. As the driver, I expected to be paid for the service I rendered.”

The court complaint notes that Lyft continued to make these deceptive earnings claims even after receiving the FTC’s Notice of Penalty Offenses that put the company on notice that deceptive earnings claims were unlawful.

In addition to requiring the company to pay a $2.1 million civil penalty, the proposed settlement also will prohibit Lyft from making any earnings claim unless they have meaningful evidence to back that claim up. In addition, Lyft will be prohibited from making any claims about hourly earnings that include tips as part of the stated hourly amount. The settlement will also require 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 requires Lyft to provide notice to its drivers about the settlement.

Today’s action is part of the FTC’s ongoing efforts to protect workers in the gig economy. In 2021, the FTC reached a settlement with Amazon returning more than $60 million to Amazon Flex drivers whose tips were illegally withheld. In 2022, the FTC took action against HomeAdvisor for misleading service providers, and the following year obtained an order barring false claims and providing millions in redress. This year, the FTC challenged deceptive earnings claims and other unlawful practices by Arise and Care.com, securing conduct relief and more than $15 million for affected workers. The FTC has detailed how its authorities apply in the gig economy in its Policy Statement on Enforcement Related to Gig Work.  

The Commission vote to authorize the staff to refer the complaint to the DOJ and to approve the proposed consent decree was 3-2, with Commissioners Melissa Holyoak and Andrew Ferguson dissenting. Chair Lina M. Khan issued a statement joined by Rebecca Kelly Slaughter and Alvaro M. Bedoya. Commissioner Holyoak issued a statement. Commissioner Andrew N. Ferguson issued a statement. The DOJ filed the complaint and proposed consent decree upon notification and referral from the Commission in U.S. District Court for the Northern District of California.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when approved and signed by the District Court judge.

The staff attorneys on this matter were Evan Rose and Abdiel T. Lewis of the FTC’s Western Region San Francisco.