Lyft Inc. and Uber Technologies Inc. received an emergency stay that will allow them to continue operations in California rather than shut down or be forced to reclassify drivers as employees instead of independent contractors.
Shares of both companies surged on the news after initially trading lower in anticipation of a shutdown.
Lyft and Uber have until 5 p.m. on Aug. 25 to file written consents to the expedited procedures within the order, according to the judge’s conditions for staying the preliminary injunction. If they do not do so, the injunction’s suspension will be lifted at 5 p.m. that day.
“Our rideshare operations can continue uninterrupted, for now,” Lyft said in an updated blog post. “Thanks to the tens of thousands of drivers, riders, and public officials who urged California to keep rideshare available for so many people who depend on it.”
Obeying the new classification would’ve caused Lyft and Uber to treat so-called gig workers more like full-time employees and provide them with benefits, making their employment more expensive.
“At 11:59PM PT today our rideshare operations in California will be suspended,” Lyft said in a blog post earlier Thursday. “This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips.”
Lyft has for years provided drivers with a minimum earnings guarantee and a health care subsidy while allowing them the flexibility of being independent contractors, something they want. The company said the new law would cause 80% of drivers to lose work and result in the rest having scheduled shifts and a cap on hourly earnings.
It would also make it more expensive for riders in low-income areas that are faced with few transit options, Lyft said.
Prop 22, a ballot measure in the November election, if passed, would give drivers the benefits and flexibility they seek while also maintaining the ride-sharing model.
Lyft earlier this month reported ridership fell 60% year-over-year in the three months through June as stay-at-home orders aimed at slowing the spread of COVID-19 eliminated non-essential travel.
Shares were down 35% this year through Wednesday, lagging the S&P 500’s 4.46% gain.