A notice of the settlement was filed by the 43-year-old singer in court on February 8, 2013, and the details of the deal have not been disclosed yet, reported E! online.
The 'On the Floor' hitmaker was slapped with legal action from her former employee, last year amid allegations that he was forced to quit the job for the way he was treated by his ex-boss' manager Medina.
Driver also claimed he owed money for additional on-call services which both the parties had agreed over his USD 72,000 annual salary.
Her extortion argument was dismissed by Los Angeles Superior Court in December 2012.