(Reuters) — Shares of Uber Technologies and Lyft Inc. rose on Tuesday after a California court ruled that drivers can be treated as independent contractors rather than employees, removing some future regulatory risks for the ride-sharing companies.
Analysts expect the decision will likely be appealed before the California Supreme Court, which could take months to decide whether to accept the case, and over a year to issue a decision. For now, though, the ruling means companies like Lyft, DoorDash and Uber have avoided a significant hit to their revenue.
Shares of Lyft, which hit record lows on Monday, rose 6%. Uber and DoorDash rose 7% and 6%, respectively.
A three-judge panel of the state appeals court on Monday reversed a lower court ruling in 2021
that the ballot measure Proposition 22 was unconstitutional.Passed in November 2020, Prop 22 exempted app-based drivers from a 2019 state law known as AB5 that makes it difficult to classify workers as independent contractors rather than employees.
If Prop22 is repealed, it will be replaced by AB5, which would require companies to reclassify drivers as employees and provide full benefits and hourly wages rather than just travel time.
The latest ruling could also pave the way for other states to follow suit, analysts said.