Skip to main content

Market Overview

Uber, Lyft Are Exempt From Classifying Drivers As Employees After Proposition 22 Ballot Victory

Share:
Uber, Lyft Are Exempt From Classifying Drivers As Employees After Proposition 22 Ballot Victory

California has voted in favor of Proposition 22, a ballot measure that exempts ride-hailing companies like Uber Technologies Inc (NYSE: UBER) and LYFT Inc (NASDAQ: LYFT) from classifying drivers as employees, reports the Wall Street Journal.

What Happened: The California Assembly Bill 5 (AB5) went into effect from Jan. 1, 2020. and it required companies that hire independent contractors to reclassify them as employees. The law affects more than one million gig economy workers hired by companies like Uber, Lyft, and DoorDash.

Uber and Lyft had threatened to suspend their service in California if they were forced to reclassify the workers. The ride-hailing companies and its allies sponsored the proposition 22 ballot measure, asking the voters to exempt them from reclassifying the gig economy workers.

The campaign was the most expensive for any ballot in California's history, and it will set the tone for the rest of the country, as per WSJ. With more than 60% ballots counted and the vote running 58% in favor of the measure, the Associated Press projected it would pass.

Why It Matters: If aggregator companies were to reclassify workers as employees, it would have to pay benefits such as paid sick days and health insurance when they are already struggling to make a profit. 

The law affects other aggregator companies like Instacart and DoorDash.

To garner support for the ballot, the companies guaranteed other benefits such as health insurance for drivers who work 15 hours or more a week, occupational-accident insurance coverage, and 30 cents for every mile driven, among other protections -- WSJ.

Democratic nominee Joe Biden had opposed the measure in May and said that "gig economy giants are trying to gut the law," CNBC reports.

Price Action: UBER shares are higher by 12.4% to $40.20, and LYFT shares have gained 15% to $30.16 in the pre-market session on the last check Wednesday.

 

Related Articles (UBER + LYFT)

View Comments and Join the Discussion!

Posted-In: CaliforniaGovernment News Regulations Legal Top Stories Tech Media Best of Benzinga

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com