California drivers who sued Lyft in 2013 over whether they should be treated as employees or contractors have settled their closely watched lawsuit, court documents show.

According to a Tuesday proposed settlement, which is likely to be finalized by the San Francisco federal judge overseeing the case next, Lyft will pay $12.25 million and will re-word its labor agreement with its workers, making it harder for the company to fire drivers at any time. The plaintiffs’ lawyers will take 30 percent of that amount; the remainder will be divided among California-based drivers and go toward covering court fees. The changes to the terms of service will be applied nationwide.

The settlement in Cotter v. Lyft has no immediate legal impact on other cases brought by the same plaintiffs' lawyer, Shannon Liss-Riordan, who has introduced a slew of similar labor suits against GrubHub, DoorDash, Caviar, and Uber.

In this case, the fundamental issue remains unsettled: drivers are still treated as contractors and still aren’t reimbursed for work-related costs like gas, insurance, and other expenses. Contractors are also not eligible for worker's compensation, unemployment, and other benefits. Liss-Riordan’s pending case against Lyft’s biggest rival aims to answer essentially the same questions.

In respective statements, both Lyft and Liss-Riordan applauded the settlement.

"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 and enable consumers to continue benefiting from safe, affordable transportation," Kristin Sverchek, Lyft’s general counsel, said in a statement sent to Ars.

Liss-Riordan called the settlement an "adequate resolution." She said that while this case doesn’t create a precedent of liability, it and others can be used to set the tone for the industry. "While the settlement does not achieve everything we had hoped for—namely a reclassification of the drivers as employees (as other sharing-economy companies have done recently, including Shyp, Instacart, Luxe Valet, Munchery, Eden, and most recently Honor)—it will result in some significant changes that will benefit the drivers," she wrote.

It ain’t over yet

One labor law professor told Ars that this settlement still doesn’t resolve the fundamental question of whether startups can rely on this type of labor model.

"The outcome here is disappointing because it nibbles at the corners of a work model that is fundamentally premised on an employment relationship," said Michael LeRoy, a labor law professor at the University of Illinois.

He added that this case won’t set any legal precedent, which could make things more difficult for future drivers.

"The bigger issue is that these claims will not be fought in a public court, where precedents can be set," he added. "It hides future problems and shortchanges the public from rulings that have broader applicability. That may be the worst feature of this settlement."

Despite the fact that Cotter won’t set a formal legal precedent, it could serve as a warning to other "sharing economy" companies.

"I think this will have a substantial impact on both the other cases and on the sharing economy as a whole," said Byron Goldstein , an Oakland, California-based lawyer who is currently involved in similar lawsuits. "Lyft has demonstrated that it’s becoming a more mature company. It’s no longer a startup merely playing with other people’s money and unconcerned about following the law. It’s decided to move more toward a sustainable business model."

Liss-Riordan also noted that the volume of complaints that her firm has heard from Lyft drivers is far less than those it hears from Uber drivers, which strengthens her resolve in O’Connor, a case that was certified last year as a class-action suit.

"We have not been hearing so many concerns from Lyft drivers, which leads us to believe that Lyft is treating its drivers with more respect than Uber is treating its drivers," Liss-Riordan added. "Although this difference does not speak to whether either company has rightly or wrongly chosen to classify its drivers as independent contractors instead of employees, it cements our belief that far more Uber drivers than Lyft drivers are anxious for us to continue pursuing these misclassification claims against Uber. And with the court's ruling striking down Uber's arbitration clause and allowing the case to proceed on a class-wide basis, we will have the opportunity to do just that."

For now, O’Connor is scheduled to go to trial in a San Francisco federal court in June 2016.