A new California ruling on Thursday says that the two ridesharing companies, Lyft and Uber, have to categorize their drivers as employees rather than independent contractors, NPR reported.
The ruling sides with an August decision from a lower court, ordering the two companies to reclassify their contractors under the labor law.
Moreover, the Thursday ruling will take effect after 30 days.
Also, Lyft and Uber can still appeal at the California Supreme Court.
Threat to Leave
In August, the two companies threatened to stop their operations in California if the court will push them to reclassify their drivers as employees.
However, they did not push through with it after the court allowed Uber and Lyft to return to business while an appeal is ongoing.
Both companies argue that the law does not apply to them based on their business model.
Lyft, during the August Sacramento ruling, said that the ruling is not what their drivers want.
They also say it will affect their current set-up of “flexibility.”
Moreover, if the court pushed through with its ruling, the effect will affect both the riders and drivers, said Lyft.
In addition to reduced services for riders, 80% of drivers might also lose their work, Lyft added.
What is Proposition 22?
Uber and Lyft’s last chance to retain its current business model is through the passage of Proposition 22.
The companies have been urging voters to vote for Proposition 22 in November since August.
The proposition will allow companies like Uber and Lyft to continue classifying their workers as individuals contractors.
However, it also means that their drivers are not legible for the benefits other employees experience.
For example, drivers will not get insurance and worker’s compensation.
Uber and Lyft maintain that drivers support the proposition.
According to a poll launched by The Rideshare Guy, an independent blog post for ridesharing apps, 60% of California drivers support the proposition, while 23.6% do not.
Moreover, Lyft and Uber need the support of California voters for the proposition to pass.
According to a University of California Berkeley poll, 39% of California voters support the proposition, while 36% do not support it.