California Attorney General To Ask Judge To Classify Lyft, Uber Drivers As Employees

California Attorney General Xavier Becerra will request a preliminary injunction on Thursday to change the status of Uber Inc UBER and Lyft Inc LYFT drivers to employees.

What Happened

California passed a law in January, which makes it harder for companies offering "gig economy" jobs to classify their workers as contractors instead of employees.

Becerra said in a statement Wednesday, “Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to foot the bill for obligations you have as an employer — whether it’s paying a legal wage or overtime, providing sick leave, or providing unemployment insurance.”

The attorney general added, “That’s not the way to do business in California. We’re seeking a court order to force Uber and Lyft to play by the rules.”

Both Uber and Lyft shares closed nearly 8% lower on Wednesday.

Why It Matters

Alison Stein, an Uber economist, estimates that 158,000 additional work opportunities at Uber are under threat due to the reclassification. 

Uber, Lyft, along with DoorDash, Instacart and Postmates are spending $110 million on a ballot measure due November to ask voters to keep drivers independent albeit with some benefits and wage floors.

A Lyft spokesperson decried the state’s move to the courts, saying, “Trying to force drivers to give up their independence 100 days before the election threatens to put a million more people out of work at the worst possible time,” reported the San Francisco Chronicle.

Price Action

Uber shares traded 0.49% lower at $30.31 in the after-hours session on Wednesday. The shares had closed the regular session 7.84% lower at 30.46.

On Wednesday, Lyft shares closed 7.88% lower at $32.80.