Shares of Uber (UBER) and Lyft (LYFT) are sharply higher after a U.S. court ruled that the ride hailing and delivery companies can continue treating their workers as independent contractors.
A California appeals court found that a labour measure known as “Proposition 22” that treats workers at companies such as Uber and Lyft as contractors is constitutional.
Labour groups had vehemently opposed Proposition 22, saying it denied people basic rights such as sick leave.
The court ruling overturns a decision made by a lower California court that found Proposition 22 hurt the ability to set standards in the workplace and protect workers.
Uber, Lyft and several other technology firms that rely largely on a contract workforce had appealed that lower court decision.
Now, a three judge panel at the appeals court level has ruled that Uber and Lyft have a right to continue treating workers as independent contractors.
The ruling has sent the share prices of both Uber and Lyft up 7% each in premarket trading.
However, the appeals court did remove a clause from Proposition 22 that restricted the right to collective bargaining among workers in California.
The Service Employees International Union, which challenged the constitutionality of Proposition 22, said it is planning to appeal the latest court decision.
In November 2020 national elections held in the U.S., Uber and Lyft spent a combined $205 million U.S. campaigning in support of Proposition 22.
So called “gig workers,” or contractors, at companies such as Uber and Lyft are paid for individual tasks such as delivering food rather than a regular wage or salary.
Most U.S. labour laws, such as those requiring a minimum wage, do not apply to contractors.
Uber’s stock has gained 5% over the past 12 months to trade at $30.82 U.S. per share. Lyft’s stock has declined 76% in the last year to trade at $8.46 U.S. a share.
