SAN FRANCISCO — Lyft has agreed to a settlement worth $2.1 million to resolve allegations that it overstated the earnings drivers could expect, particularly during the recovery period post-pandemic.

The lawsuit was initiated by the U.S. Justice Department just a week prior to the announcement in a federal court in San Francisco on October 25. On the same day, Lyft revealed that it had reached a preliminary agreement with the Federal Trade Commission (FTC) concerning similar issues.

U.S. Magistrate Judge Peter Kang endorsed the settlement on Thursday, with the details becoming accessible to the public the following day. Alongside the financial restitution, Lyft is now prohibited from employing the deceptive practices highlighted in the case.

Investigations launched by both the Justice Department and the FTC arose from evidence suggesting that Lyft had been advertising inflated earnings in its efforts to recruit more drivers as demand for ride-hailing services began to rise after the pandemic’s initial impact.

The lawsuit contended that from April 2021 to June 2022, Lyft exaggerated the earning potential of drivers in various major cities across the United States. For instance, the company claimed that drivers could earn more than $40 per hour in cities like San Francisco, Los Angeles, and Boston, while suggesting earnings of over $30 per hour in places such as Atlanta, Dallas, and Miami.

However, the reported figures were derived from the earnings of only the top 20% of Lyft drivers, rendering them unrealistic for the majority who worked for the company, according to the allegations. Some figures claimed earnings as high as $44 per hour in San Francisco.

“The Justice Department will vigorously enforce the law to stop companies from misleading Americans about their potential earnings in the gig economy,” stated Principal Deputy Assistant Attorney General Brian M. Boynton in a statement released on Friday.

Lyft has already implemented changes to many of the practices that were called into question in the lawsuit. The company is now led by David Risher, who took over as CEO last year.

“We agreed to this settlement because we recognize the importance of transparency in maintaining trust in the communities we serve,” Lyft affirmed last week when it initially revealed the agreement with the FTC.