In late January, people using the Lyft app in New York City got an offer they could hardly refuse; Car service rates 15 percent cheaper than usual.

The rate drop came three days after industry leader Uber dropped its rates, a practice both companies have been using in winter months.

Lyft Communications Manager Katie Dally said matching Uber is an attempt to be a price-beater.

“We want to remain the most affordable option for passengers. So we are lowering prices in New York City to make it easier for people to ride more often all winter long. Lyft is the only ridesharing platform that offers drivers tipping and the opportunity to earn back some of the commission we take through the Power Driver Bonus,” she said.

In mid-January, Uber announced price cut in multiple cities. Days later, Lyft matched it. Lyft lowered fares in 33 cities, but excluded New York and Chicago.

The Big Apple price war comes as both companies fight battles on multiple fronts regarding whether the ride-hail giants will be forced to treat their contracted drivers like regular employees.

Lyft recently agreed to pay its drivers $12.25 million as part of a California legal settlement over how the company treats its contractors. Lyft drivers had been looking for a lot more, including entitlement to minimum wage, compensation for business expenses, and other trappings of traditional employment. The Lyft settlement will be paid out in proportion to how much time each driver has spent driving for Lyft in the state.

Apart from the cash settlement, Lyft also agreed that drivers could no longer be terminated at will—instead, there will have to be a reason for the termination going forward.
Uber is due to face a similar lawsuit in June.

The company quietly rolled out a driver tracking program in Houston, Texas, that uses location data to closely monitor drivers’ performance. That includes times when the driver has exceeded the speed limit and accelerated or braked quickly.

Similar technology is used in the trucking industry. Uber says the tracking is useful for ensuring its drivers operate their vehicles safely, and for getting to the bottom of rider complaints about the quality of a ride. Uber could also be interested in the data gathered from such a program as a way to help in its efforts to develop self-driving cars.

“We are pleased to have resolved this matter on terms that preserve the flexibility of drivers to control when, where and for how long they drive on the platform,” said Lyft general counsel Kristin Sverchek.

At issue for both of these companies is the “1099 economy”—a large workforce of independent contractors who are crucial to the structure of the sharing economy.

Classifying workers as contractors is a boon for the companies but hard on workers because employee status entitles a worker to a broad range of legal protections. Independent contractors are not entitled to minimum wage, overtime, health insurance, workers’ compensation, unemployment, proof of employment, or lower taxes. They also have to pay for gas and car maintenance.

Classifying workers as employees is definitely more expensive for a company, but advocates argue that companies like Uber, with a $62 billion valuation, can afford to treat workers fairly. Uber, meanwhile, argues that the independent contractor system is actually good for workers as it allows them flexibility that a 9-to-5 job would not.

So what does the Lyft settlement mean for the upcoming Uber case? The fact that the Uber case is headed to trial is another significant difference between it and this Lyft settlement. While the companies are very similar in terms of the service they deliver, the stakes in this issue are higher for Uber.

Both companies hold financial details close to the vest, which makes direct comparison difficult, but there is widespread agreement that Uber holds a greater market share in the industry. More drivers in more cities means more potential liability for Uber.