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A Win for Rideshare Companies in California

Rideshare and Delivery Drivers Will Still Be Classified as Contractors

Uber (Uber), Lyft (LYFT), and a number of other companies that depend on gig-workers for their business models won on Election Day. California voters decided to allow rideshare and delivery companies to continue classifying their drivers as independent contractors rather than as employees. Shares of Uber and Lyft climbed 12.5% and 12% respectively on news of the decision, and were up 14.59% and 11.28% at market close yesterday.

The decision to uphold Proposition 22, which allows companies like Uber and Lyft to classify their drivers as contractors, will let these companies continue operating with their current business models. The state of California is an important market for both companies, making up about 9% of Uber’s pre-pandemic business and 16% of Lyft’s pre-pandemic business.

A Record-Setting Campaign

The rideshare industry is already reeling from weak demand as a result of the pandemic. Changes in California law would have put more pressure on these companies. Knowing this, Uber and Lyft, along with Postmates and Instacart, spent about $200 million to try and sway voters on Prop 22. This was the most money ever spent on a ballot measure campaign in California.

The companies sent notifications to drivers saying most of them would not be hired as employees if regulations changed. Additionally, the companies said drivers would no longer be able to choose their own schedules if they became classified as employees. The companies also messaged customers, claiming prices would be higher and wait times would be longer if California law changed.

The Impact of the Decision Outside of California

In their fight for public support of Prop 22, the companies also independently promised new protections for their drivers. They told voters they would give health insurance to drivers working 15+ hours per week, occupational-accident insurance coverage, and other benefits. Those opposing the measure argued that these benefits were still less than what people working full-time as drivers deserve.

For lawmakers who have been fighting for gig-workers’ rights, the decision in California is a significant loss. The battle between rideshare companies and the California government has been highly publicized, and it could set the tone for discussions about gig-economy regulations in the rest of the country and the world.

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