The Federal Trade Commission is taking action against Lyft for misleading drivers about how much they could earn per hour and with special incentives.
Lyft has agreed to a settlement that requires its future earnings claims to be based on actual typical earnings, backed by evidence. The settlement also mandates clear disclosure of the terms of its “earnings guarantee” offers and a $2.1 million civil penalty.
Lyft had advertised inflated earnings that only top drivers could achieve, misleading most other drivers. It also failed to explain that tips were included in the hourly earnings and that its "earnings guarantees" only covered the difference between actual earnings and the guaranteed amount.
“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.”
About the Lyft complaint
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.
Lyft drivers complained
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.
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.