In this article

A driver uses the Uber app to drop off a passenger in London.
Chris J. Ratcliffe | Bloomberg via Getty Images

Shares of Uber and Lyft traded lower in the premarket Monday after a California court ruled that Prop 22, a ballot measure that exempted gig workers from state labor law, was unconstitutional.

Uber was down more than 3.2% in premarket trading, while Lyft dipped nearly 3.4%.

Alameda County Superior Court Judge Frank Roesch wrote in a ruling late Friday that Proposition 22 is unconstitutional as “it limits the power of a future Legislature to define app-based drivers as workers subject to workers’ compensation law.” That makes the entire ballot measure “unenforceable.”

California voters approved Proposition 22 by a majority vote in November. The ballot measure effectively exempted several gig economy companies from the state’s recently enacted law, Assembly Bill 5, which had aimed to make their workers into full-time employees.

Prop 22 proposed workers for app-based food delivery and ridesharing companies should remain contractors, and be entitled to certain benefits and protections, like minimum earnings.

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

A coalition representing the companies said it plans to appeal. The firms have started to fund a measure to put a similar ballot before Massachusetts voters next year.

— CNBC’s Lauren Feiner contributed to this report.

Subscribe to CNBC on YouTube.

You May Also Like
Samsung Galaxy A55 With Android 15-Based One UI 7 Surfaces on Geekbench Ahead of Beta Release

Samsung Galaxy A55 With Android 15-Based One UI 7 Surfaces on Geekbench Ahead of Beta Release

Samsung Galaxy A55 was launched in India in March this year alongside…

DoorDash sells shares at $102 in IPO, pricing above range

A DoorDash Inc. delivery person places an order into an insulated bag…
Next-Gen Xbox Will Be the ‘Largest Technical Leap’ for a New Console Generation, Says Microsoft

Next-Gen Xbox Will Be the ‘Largest Technical Leap’ for a New Console Generation, Says Microsoft

Microsoft shared new details about its plans for Xbox hardware, teasing the…

Meet the guy responsible for helping Meta, Google and Amazon prepare for new laws in Europe

European Union flags flutter outside the EU Commission headquarters, in Brussels, Belgium,…