Lyft shares drop after court says gig worker unconstitutional

Lyft shares traded lower on Monday after a California court ruled that Proposition 22, a voting measure that exempted concert workers from state labor laws, was unconstitutional.

Lyft was down about 1% by mid-morning, while Uber was up less than 1%. Shares of both were down in the pre-market.

Alameda County Superior Court Judge Frank Roesch wrote Friday night in a ruling that Proposition 22 is unconstitutional because “it limits the power of a future legislature to define app-based drivers as workers subject to the law on industrial accidents “. This makes the whole ballot measure “inapplicable”.

California voters approved Proposition 22 with a majority vote in November. The ballot measure effectively exempted several odd-job economy companies from the recently enacted state law, Assembly Bill 5, which sought to make their workers full-time employees.

The workers proposed by Proposition 22 for app-based food delivery and ride-sharing companies should remain contractors and be entitled to certain benefits and protections, such as a minimum wage.

The move is a blow to companies in the gig economy, including Lyft, Uber, Instacart and DoorDash, which have spent more than $ 200 million to support the poll in an effort to maintain their current business models. Classifying drivers as subcontractors allows companies to avoid costly employment benefits, such as unemployment insurance.

A coalition representing the business said it plans to appeal. The companies have started funding a measure to bring a similar proposal to Massachusetts voters next year.

– CNBC’s Lauren Feiner contributed to this report.

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