Uber, Lyft Shares Drop As California Regulator Rules Drivers Are Now Employees Under State Laws

The shares of Uber Technologies Inc. UBER and Lyft Inc. LYFT dropped in the regular and after-hour sessions on Wednesday as a California regulator ruled that the drivers on the ride-hailing companies' platforms are employees under the state's AB 5 law.

What Happened

The Public Utilities Commission of the State of California said that drivers for Transportation Network Companies, like Uber and Lyft, are considered as employees under the state's new gig-economy law, Business Insider reported.

"[For now,] TNC drivers are presumed to be employees and the Commission must ensure that TNCs comply with those requirements that are applicable to the employees of an entity subject to the Commission's jurisdiction," the regulator said in the order.

Why It Matters

Uber and Lyft representatives denounced the order in a statement to Insider and said the move would hurt employment and the ability of Californians to access affordable rides.

"Forcing them to be employees will have horrible economic consequences for California at the worst possible time," a Lyft spokesperson told Insider.

Both companies have resisted and actively funded opposition to the California gig-economy law that intends to bring job security, health insurance, and other privileges available to full-time employees in the state to workers that were previously classified as independent contractors.

Price Action

Uber shares closed 4.8% lower at $34.83 on Wednesday and dropped another 1.6% in the after-hours session at $34.28.

Lyft shares closed nearly 1.7% lower at $38.56 the same day and traded about another 1.5% lower in after-hours at $38.