Lyft stocks fall after courts say workers in lawsuits are unconstitutional

Lyft’s shares were traded lower Monday after a California court ruled that Proposition 22, an election measure that exempted workers from state labor law, was unconstitutional.

Lyft fell about 1% in mid-morning trade, while Uber rose less than 1%. The shares of both fell in the premarket.

Alameda County High Court Judge Frank Roesch wrote in a ruling Friday that Proposition 22 is unconstitutional because it “limits the power of a future legislature to define application-based drivers as workers subject to the workers’ compensation law “. This makes the entire ballot measure “inapplicable”.

California voters approved Proposition 22 by a majority of votes in November. The voting measure effectively exempted several economic companies from the recently enacted state law, Assembly 5, which aimed to turn their workers into full-time employees.

The proposed 22 proposed workers for application-based food and travel-sharing food delivery companies should continue to be contractors and be entitled to certain benefits and protections, such as minimum income.

The decision is a blow to concert companies such as Lyft, Uber, Instacart and DoorDash, which spent more than $ 200 million to support voting in an effort to maintain their current business models. Classifying drivers as contractors allows companies to avoid the costly benefits associated with employment, such as unemployment insurance.

A coalition representing companies said it plans to appeal. Companies have begun funding a measure to present a similar proposal to Massachusetts voters next year.

– CNBC’s Lauren Feiner contributed to this report.

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