(Bloomberg) -- Ride-share company Lyft Inc. has agreed topay $12.25 million and change how it treats its California driversto settle claims of unfair treatment, while rival Uber TechnologiesInc. heads toward trial to fight similar demands by itsdrivers.

The proposed settlement would allow Lyft to deactivate driversonly for specified reasons rather than terminating them at will,according to a court filing Tuesday. Lawyers for the drivers askeda federal judge in San Francisco to approve the accord.

The agreement provides for a $12.25 million settlement fund.Drivers in California would receive a portion of the settlementbased on the number of hours they have worked for Lyft.

“We are pleased to have resolved this matter on terms thatpreserve the flexibility of drivers to control when, where and forhow long they drive on the platform and enable consumers tocontinue benefiting from safe, affordable transportation,” KristinSverchek, general counsel for Lyft, said in an e-mailedstatement.

The drivers didn’t get everything they wanted in the lawsuit.They argued they were employees entitled to minimum wage,reimbursement for expenses, overtime and other benefits.

“The agreement does not make any change to the classification ofLyft’s California drivers who will continue to operate asindependent contractors,” the company said in the statement.

Uber is scheduled to face its drivers at a trial inJune over claims they should be treated as employees ratherthan contractors.

The deal indicates Lyft and Uber may be able to escape thethreat of lawsuits by their drivers, a major question marklingering over their businesses. Both companies and much of theso-called sharing economy rely on the flexible labor of independentcontractors to make their business models work. In an investorprospectus, Morgan Stanley listed worker classification as a riskfactor for an investment in Uber. Some investors believe thequestion should be resolved before either company could gopublic.

Lyft recently closed a $1 billion round of financing that valuedthe company at $5.5 billion. The round essentially doubled the SanFrancisco-based company’s total funding to date. General Motorscontributed $500 million to the round. Uber, which is competingglobally and has raised more than $10 billion, has aggressivelycompeted with Lyft on pricing. Both companies dropped fares incities across the U.S. this month.

The case is Cotter v. Lyft Inc., 13-04065, U.S.District Court, Northern District of California (SanFrancisco).

Related: GM invests $500 million in Lyft to bolster allianceagainst Uber

Check us out on Facebook and give us a Like!

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.