For more than two years, ride-hailing companies have fought with their drivers over the drivers’ employment status. Now, one of those companies has found a way to bury the hatchet.

Lyft, a popular start-up based in San Francisco, agreed late Tuesday to settle a class-action lawsuit brought in 2013 by Lyft drivers in California. The drivers had sought to be recognized as full-time employees who would be eligible for benefits from the company, rather than as independent contractors.

Under the settlement, Lyft drivers will continue to be classified as contractors. The company agreed to pay $12.25 million to those represented in the suit and said it would amend the terms of service to which drivers must agree when signing up with the platform so that they are consistent with the definition of a contractor. The settlement is subject to court approval.

“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 news release.

Shannon Liss-Riordan, the attorney representing the drivers in the suit, said in a statement that the settlement would “provide substantial benefits to drivers and distribute reimbursement for some of the expenses they have incurred while driving for Lyft.” Lyft agreed to pay arbitration fees and other costs in claims initiated by the company or drivers, for instance, and Ms. Liss-Riordan said the company would no longer be able to terminate drivers at will; it must find cause to do so.

The employment status of those who work for ride-hailing services and other on-demand companies has become a hot topic of debate. While on-demand companies say independent contractors gain a lot of flexibility by not being full-time employees, critics say the workers are shortchanged because they do not get benefits and other protections. Politicians and others have taken up the issue, which is likely to be closely scrutinized this year during an election cycle.

Uber, Lyft’s chief rival, remains embroiled in a similar class-action suit in California in which drivers are seeking full-time employee status.

Any change in worker classification could hurt the business models of companies like Lyft and Uber. By treating workers as contractors, the companies can keep labor costs low, since they do not need to pay drivers’ payroll taxes and are not subject to minimum-wage and overtime laws.