After earlier rejecting a proposed settlement U.S. District Judge Vince Chhabria in San Francisco ordered Lyft's $27 million settlement for a group of 1099 reportable independent contractor drivers.

Lyft drivers in California had recently sued the company, arguing they should be classified as employees. This settlement allows them to remain independent contractors with payments to them reportable on Forms 1099, however at a cost to Lyft of upwards of thousands of dollars per payee. Uber faces a similar class-action lawsuit from 1099 reportable drivers in California and Massachusetts. A settlement offer in that case valued at up to $100 million was rejected last year by a judge who deemed it inadequate for drivers.

In either case these settlements leave it open to the IRS and Department of Labor, as well as state and local regulators, as to whether Lyft and Uber shall face additional fines and penalties for making 1099 reportable payments to drivers who might more appropriately classified be employees. 

Given these issues are clearly on everybody's radar and becoming more prominent the takeaway is clear for accounts payable departments around the country. You must make additional efforts to make sure that your 1099 reportable payees (including former employees working as "contractors" for your organization) could not be considered employees by federal and state level regulators. This is done by a variety of methods, all of which we would be more than happy to help you with. These risk-reducing techniques typically are carried out within an independent fact and circumstance based methodology that revolves around answering a series of questions surrounding the 1099 reportable payments at issue.

Though we can help make doing this a much easier process, it is still up to you to notify your management team if you spot any potential issues. In addition, this is something you very much want to do. Time and again we have seen management react in a disproportionately adverse way (read: put your job at risk) against accounts payable personnel who have not fully appraised them of the risks caused by such 1099 reportable payments. Be proactive, and know that we are ready to help if needed.