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SAN FRANCISCO – Lyft is paying $2.1 million to settle a lawsuit that accuses the ride-hailing service of overstating how much money drivers could earn as the company tried to recover from a sharp drop in demand during the pandemic.

The agreement resolves a case filed by the US Department of Justice a week ago in federal court in San Francisco on October 25, the same day Lyft revealed that it had negotiated the terms of the agreement that revolved around the same issues with the Federal Trade Commission.

Federal Judge Peter Kang signed an order formalizing the agreement on Thursday before it was made public on Friday. In addition to having to pay $2.1 million, Lyft has also been prohibited from engaging in the deceptive practices highlighted in the case.

Both the Justice Department and the Federal Trade Commission have been investigating Lyft since they discovered evidence that it was advertising inflated compensation rates while trying to recruit more drivers as the pandemic began to subside and demand for ride-sharing increased.

The lawsuit alleges that Lyft exaggerated the amounts its drivers could earn in a variety of major US cities from April 2021 to June 2022. Lyft announced that drivers could earn more than $40 per hour in cities such as San Francisco , Los Angeles and Boston and more than $30 per hour in cities like Atlanta, Dallas and Miami.

But those numbers were based on earnings among the top 20% of Lyft drivers, leaving them unattainable for most others who picked up passengers for the ride service, the lawsuit alleges. as much as $44 per hour in San Francisco.

“The Department of Justice will aggressively enforce the law to prevent companies from misleading Americans about their potential profits in the gig economy,” Principal Deputy Assistant Attorney General Brian M. Boynton said in a statement Friday.

Lyft has already changed many of the practices cited in the lawsuit and is now overseen by a CEO, David Risher, who joined last year.

“We agreed to this settlement because we recognize the importance of transparency in maintaining trust in the communities we serve,” Lyft said last week when it first disclosed the agreement with the Federal Trade Commission.