Uber and Lyft could save millions of dollars after winning a major court victory that said drivers for the ride-hailing services can be called independent contractors. Uber stock jumped on the news Tuesday, as did Lyft and food delivery company DoorDash.
A three-judge state appeals panel in California ruled late Monday that these services don't have to continue to categorize people as employees. Further, it allows Uber, Lyft, DoorDash and others to bypass state laws requiring worker protections and benefits.
The ruling pertains to California Proposition 22, approved by voters in November. Proposition 22 says drivers for companies like Uber and Lyft are independent contractors with no benefit entitlements such as paid sick leave and unemployment insurance.
A lower California court ruled Proposition 22 illegal, but Monday's ruling reversed that decision. An appeal to the California Supreme Court could take months.
Uber Stock Action
Uber stock jumped 5% to close at 32.36 on the stock market today. Lyft climbed o.6% to 8.51, while DoorDash surged 5.9% to 56.99.
"Today's ruling is a victory for app-based workers and the millions of Californians who voted for Prop 22," Tony West, Uber's chief legal officer, said in a written statement. "We're pleased that the court respected the will of the people."
But the ruling is a defeat for labor unions.
"Today the Appeals Court chose to stand with powerful corporations over working people, allowing companies to buy their way out of our state's labor laws and undermine our state constitution," Lorena Gonzalez Fletcher, executive secretary-treasurer of the California Labor Federation and a former state assemblywoman, said in a written statement. "It would be an understatement to say we are disappointed by this decision."
Uber stock is up 18% this year.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
