Lyft Inc. moved a big step closer to sealing a $27 million deal with drivers that leaves them classified as independent contractors.

U.S. District Judge Vince Chhabria in San Francisco on Thursday gave the deal preliminary approval after ruling in April that an earlier $12.5 million offer would shortchange drivers based on the company’s surging revenue.

“The new proposed settlement agreement fixes the monetary flaws the court previously identified and enhances the non-monetary benefits at least to some degree,” the judge wrote in finding that the deal is fair and reasonable.

Along with its larger rival Uber Technologies Inc., Lyft is trying to avoid a trial over drivers’ claims seeking the pay and benefits of employees. Uber’s request for preliminary approval of a similar $100 million settlement with its drivers is before another judge in the same courthouse.

With Chhabria’s approval, about 163,000 current and former California drivers will be told they can claim their share of the settlement, object to it or opt out, before a final settlement hearing.

Shannon Liss-Riordan, a lawyer for the drivers, said in an e-mailed statement that her clients will “receive the benefits of the settlement rather than waiting years,” while avoiding the risk of not being able to pursue the suit as a class action and the possibility Lyft could win at trial.

‘Step Closer’

Lyft said in an e-mailed statement that Chhabria’s preliminary approval “brings us one step closer to a final resolution.”

Chhabria concluded that the payout for drivers in the earlier settlement proposal didn’t account for the company’s skyrocketing growth through the middle of February. He figured that if the drivers had won at trial, the actual value of the reimbursement they sought for mileage and expenses would have been at least $126 million, and that other potential claims might make the case worth about $170 million.

The overall average payout under the revised accord is $141.98, with about 88,000 drivers who worked less than 30 hours collecting no more than $42 each and about 80 who drove for more than 2,000 hours receiving $5,556 or more, according to a court filing.

The drivers also negotiated for provisions that protect them against arbitrary deactivation and cover fees for arbitration proceedings over disputes.

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

This article was written by JOEL ROSENBLATT from Bloomberg and was legally licensed through the NewsCred publisher network.

Photo Credit: A judge gave preliminary approval for a $27 million deal with Lyft drivers that leaves them classified as independent contractors. Alfredo Mendez / Flickr