Technology

Last-minute California court ruling prevents Uber and Lyft from a shutdown

The companies had said they would be unable to comply with a new law that would consider their drivers employees entitled to benefits

A sign marks a rendezvous location for Lyft and Uber users at San Diego State University in San Diego, California. Photo: Reuters/Mike Blake
  • The threat to suspend service in the most populous U.S. state marked an unprecedented escalation in a long-running fight between regulators, labor groups, and gig economy companies that have upended traditional employment models around the world;
  • With the decision, Lyft shares were up almost 9% after the last-minute ruling, and Uber shares were up 6.4%.

A California appeals court on Thursday avoided a shutdown of ride-hailing services in the state by halting a lower court order that would have forced Uber and Lyft to treat their drivers as employees.

The companies had said they would be unable to comply with a new law that would consider their drivers employees entitled to benefits such as minimum wage, overtime, and sick pay and unemployment insurance.

Lyft shares were up almost 9% after the last-minute ruling, and Uber shares were up 6.4%.

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The threat to suspend service in the most populous U.S. state marked an unprecedented escalation in a long-running fight between regulators, labor groups, and gig economy companies that have upended traditional employment models around the world.

“We are glad that the Court of Appeals recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want,” Uber said in a statement.

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Lyft did not immediately respond to a request for comment.

The companies had sought the intervention of the California First District Court of Appeal in San Francisco to block an injunction order issued by a judge last week. That ruling forced the companies to treat their drivers as employees starting Thursday after midnight.

In Brazil, the Superior Labor Court favored Uber by declining employment bond among the company and a driver in February this year. It was the first time in the country that a federal body deliberated on the case, as until then, only regional courts have been ruling on this type of employment bond. Although the decision has no binding effect – when lower courts are obliged to follow the decision of a higher court – it is likely to serve as a baseline for similar cases in the future.