Back in November, our own @ColleenCoco shared a blog post about the dangers of misclassifying employees. From independent contractors to temporary workers to exempt vs. nonexempt, employee classification can be a tricky web to weave. Employers are cautioned to evaluate the role of the employee and make sure that each is labeled correctly, because that classification plays out into different realms of employment law.

Lyft, the ride-sharing company (similar to UBER), settled its lawsuit as recently as last month. At the time of publication, UBER’s lawsuit was still pending. An employee misclassification suit was filed in 2013 against Lyft, and the company just agreed to pay $12.25 million in settlement to the employees involved. Lyft was accused of misclassifying individuals as independent contractors when in fact, the company exerted the type of control over these individuals that is normally reserved for employees. As part of this settlement, Lyft agreed to modify its terms of service so that its treatment of drivers will now comply with existing laws for independent contractors in the state of California.

Drivers must be notified in writing of any issue prior to termination of their services, and if drivers feel they are not being paid fairly, they will now be given the opportunity to go before a neutral arbitrator to argue their case. The best part for these drivers? The arbitration will be at Lyft’s expense!

This will benefit an estimated 100,000 drivers for Lyft in California, and has nationwide impact for all 300,000+ drivers for Lyft. The UBER lawsuit is pending for mid-June of this year, and could have a similar impact on its drivers. Stay tuned for legal updates on this potentially explosive topic as more and more companies look into flexible working options, from independent contractors to telecommuters to part-timers and interns.