Uber Technologies (UBER) - Get Uber Technologies, Inc. Report shares slumped lower Monday, while its smaller rival Lyft (LYFT) - Get Lyft Inc Class A Report traded firmly in the red, after a judge in California invalidated a 2020 ballot initiative that allowed the ride-sharing groups to classify workers as independent contractors.
Alameda County Superior Court Judge Frank Roesch said late Friday that the 2020 decision known as Proposition 22-- which received 58% voter support -- was unconstitutional as it "limits the power of a future legislature to define app-based drivers as workers subject to workers' compensation law".
Proposition 22, which passed in November of 2020, enabled Uber, Lyft and other so-called 'gig economy' companies to allow drivers and delivery workers to set their own hours while overriding a 2019 law that classified the drivers as employees of the San Francisco companies.
The win also relieved the burden of offering healthcare, unemployment insurance and minimum wage salaries from gig economy companies, who had argued such cost would lead to job cuts and price increases.
Uber shares were marked 0.9% lower in early trading Monday to change hands at $39.65 each, while Lyft shares fell 1.7% to $45.12 each.
Uber posted a wider-than-expected second quarter loss of $509 million last month, a bottom-line miss that contrasted sharply to the group's record-high $22 billion in gross bookings.
Shares in the group are down more than 30% over the past six months, as well, as investors continue to question the group's path to profitability amid increasing COVID uncertainty and increasing mask-mandates and business restrictions around the country.