Lyft President John Zimmer told CNBC’s Jim Cramer on Monday that he is confident the travel company will overcome the latest legal hurdle that threatens its operating model.
The most recent hurdle came on Friday, when a California judge ruled the vote passed last year by state voters known as Proposition 22. Exempt California law from drivers of companies like Uber and Lyft, as well as food distribution companies. who were trying to make sure they were classified as employees, not as independent contractors.
The judge, Alameda County High Court Judge Frank Roesch, wrote in his ruling that Proposition 22 violates California’s state constitution because it “limits the power of a future legislature to define application-based drivers.” as workers subject to the Workers’ Compensation Act “. As a result, Roesch said, not all voting can be applied.
Protects the coalition of drivers and application-based services, which supports the preposition 22, he told Reuters appealing Roesch’s decision.
“Since this is happening in the higher courts, the California Court of Appeals, we are extremely confident that the proposal will be confirmed,” Zimmer, who was also a co-founder of Lyft, said in an interview Monday with “Mad Money.” .
Lyft, Uber and other companies in the so-called concert economy like DoorDash spent millions of dollars in favor of the initial voting measure, which was approved in November with nearly 59% of California voters.
Companies had warned that classifying drivers as employees would lead to higher operating costs (such as the need to pay in unemployment insurance) which in turn would pass on to consumers through price increases for services.
Lyft and Uber have struggled to achieve steady profitability throughout their history, but both are trying to get there. Investors are looking for breakthroughs in these goals, which would be complicated by having to adjust their business models in the classification of drivers.
As a result of Roesch’s ruling on Friday, Zimmer said there will be “no change” in Lyft’s operations in California.
Asked if Lyft expected to advance the appeal in about six months, Zimmer replied, “It’s hard to fully predict legal proceedings, but we’re optimistic that we’ll get a more final resolution within that time frame.”
Shares of Lyft rose nearly 3% on Monday and ended at $ 47.24 each. Uber also closed further in the session, advancing 2.6% to $ 41 per share.