Uber Technologies and Lyft can continue to classify drivers as independent contractors in California. Previously, the state Supreme Court said that a law supported by the companies and passed by voters did not wrongly limit the power of the legislative branch on worker protection.
The unanimously passed ruling was announced on Thursday in support of California's Proposition 22, which was supported by a majority of voters in 2020.
This ruling is bullish for gig economy companies, eliminating a major regulatory uncertainty for investors. If judges had invalidated Prop 22 and drivers were reclassified as employees, these companies could have faced millions of dollars in additional costs to pay drivers, which would have disrupted their business models and potentially raised costs for users in one of the largest markets in the USA.
The stock prices of Uber Technologies, Lyft, DoorDash, and Instacart all rose in response, with Lyft experiencing the largest gain, up to 7.4% at one point. At closing, Lyft's stock price fell by 1.4%.