The Varsity Tutors lawsuit that most searchers are looking for is the California misclassification case that settled for $2 million in late 2024. That case, brought under California’s Private Attorneys General Act, alleged the online tutoring platform wrongly treated its California tutors as independent contractors instead of employees. Varsity Tutors, owned by publicly traded Nerdy Inc., has faced parallel classification fights in Wisconsin and Colorado (winning both), a rescinded school-district contract in Ohio, and a steady stream of consumer complaints over refunds and billing.
The California Misclassification Settlement
In May 2019, tutors Alexander Charles and Henry Mulak filed a representative action against Varsity Tutors in Santa Clara County Superior Court. They alleged the company misclassified California tutors as independent contractors and, as a result, failed to pay minimum wage and overtime, failed to reimburse business expenses like books and materials, denied meal and rest breaks, and did not furnish accurate itemized wage statements. The suit was brought under PAGA, which lets employees sue on the state’s behalf for Labor Code violations.
Varsity Tutors agreed to settle in October 2023. The gross settlement was $2 million, with about $660,000 going to attorney fees and roughly $122,000 to litigation expenses. The named plaintiff received $18,000. Judge Theodore C. Zayner held the final approval hearing on November 20, 2024, and Nerdy paid the settlement in the first quarter of 2025. Nerdy’s SEC filings show it expensed $1.7 million for the matter in 2023 and accrued the full $2 million by the end of 2024.
The tutor contract at issue contained a mandatory arbitration clause, but it carved out an explicit exception for PAGA claims. That carve-out is what let the plaintiffs bring their case in court rather than in individual arbitration.
Wisconsin and Colorado Ruled the Other Way
Two state appellate courts have sided with Varsity Tutors on the same underlying question California addressed by settlement.
Wisconsin (2019)
In Varsity Tutors LLC v. Labor and Industry Review Commission, the Wisconsin Court of Appeals reversed a state finding that tutor Holland Galante was an employee entitled to unemployment benefits. Wisconsin’s test requires the worker to be free from the company’s control and to satisfy at least six of nine statutory conditions. The commission had conceded two: Galante used her own materials in a location of her choosing, and she had to redo unsatisfactory work without extra pay. The court found four more.
By maintaining a profile on the platform, the court held, Galante had “affirmatively held herself out as being in business.” She bore her own equipment, internet, transportation, and lesson-material costs. Her tutoring was not integrated into Varsity’s core business, which the court characterized as running a digital platform to connect students and tutors rather than providing tutoring itself. And her contractual duty to carry auto insurance counted as a recurring business liability. The court called Varsity’s model “nearly identical” to ride-sharing platforms like Uber and Lyft.
Colorado (2017)
Two years earlier, in Varsity Tutors LLC v. Industrial Claim Appeals Office, the Colorado Court of Appeals reversed an administrative determination and ruled the tutors were independent contractors. The court adopted a “totality of the circumstances” analysis instead of demanding traditional markers of an independent business like business cards or a separate office, and it rejected the argument that working exclusively through one platform automatically pointed to employment. Workers, the court said, could have sought other clients.
Why California Was Different
California Assembly Bill 5, effective January 2020, codified the state Supreme Court’s Dynamex decision and imposed the ABC test. Under that test, a company must satisfy all three prongs to classify a worker as a contractor. The second prong asks whether the worker performs tasks outside the usual course of the hiring company’s business.
That is the prong the Wisconsin ruling sidestepped by characterizing Varsity as a platform rather than a tutoring provider. In California, that framing carries less weight: if tutoring is what the platform sells, the tutors are arguably doing work within the company’s usual course of business. Around the time AB5 took effect, Varsity Tutors stopped taking new tutor applications from California residents. A company representative said only that its “licenses do not allow us to contract with tutors in California,” without directly citing the new law.
The Rescinded Akron Schools Contract
A separate dispute in Ohio in early 2024 did not involve Varsity’s own workers but did produce litigation. The Akron Board of Education approved a $156,000 state-funded contract for Varsity Tutors to provide 2,400 one-on-one reading sessions to fourth graders who had missed promotion scores on Ohio’s third-grade test.
The Akron Education Association objected. The union filed a grievance, a lawsuit in Summit County Common Pleas Court, and an unfair labor practice complaint with the State Employment Relations Board, arguing the contract outsourced work district teachers could do and violated the collective bargaining agreement. Union president Pat Shipe called the decision to hire “out-of-state, unqualified and remote strangers” something that “should never have happened in the first place.”
On February 1, 2024, the board voted 5-0 to rescind the contract. Superintendent Michael Robinson said the union’s legal actions had prevented the program from launching before a state deadline, and the Ohio Department of Education would send the $156,000 to another district. Varsity Tutors itself had never signed the contract.
Consumer Complaints and the Arbitration Clause
Readers searching for a Varsity Tutors lawsuit are sometimes customers trying to get money back rather than workers. Varsity Tutors’ terms of use include a binding arbitration agreement administered by the American Arbitration Association and a class-action waiver. Users can opt out of arbitration within 30 days of agreeing to the terms, and for claims under $5,000 the user’s share of filing fees is capped at $50. The terms also include a separate waiver for representative PAGA claims.
The Better Business Bureau reports 710 complaints against Varsity Tutors over the past three years, with 222 closed in the most recent 12-month window. Common issues include difficulty obtaining refunds for unused hours, continued billing after cancellation, a cancellation process consumers describe as obstructive, and mismatched or unreliable tutors. The company holds an A+ BBB rating and responds through the bureau’s process; some consumers have reported receiving refunds only after escalating that way.
What Tutors Say About Pay
The classification cases sit on top of an economic complaint that shows up repeatedly in tutor reviews. According to multiple sources cited in reporting on the platform, Varsity Tutors charges clients roughly $67 to $95 per hour while most tutors earn $15 to $20 per hour. Marketplace-model competitors like Wyzant let tutors set their own rates and pay out 75% of the fee, with tutors typically earning $26 to $48 per hour. Tutors also describe uncompensated time on lesson preparation, parent communication, and administrative work, along with inconsistent scheduling and platform glitches that interfere with getting paid. Those unpaid hours are the same theory that drove the California case.
Where the Legal Risk Stands Now
Nerdy Inc. continues to flag independent contractor classification as a material risk in its SEC filings. The company says it is subject to “various federal, state, and municipal proceedings” challenging the practice, but considers a loss from those pending matters “reasonably possible and not probable.” The California settlement resolved that state’s PAGA action; the classification question itself, and how it applies to a tutoring platform operating in dozens of state legal regimes, remains open.