A judge in California issued a preliminary injunction on Monday requiring Uber and Lyft to stop classifying their drivers as independent contractors, and potentially setting the stage for a major shift in their business models.
Judge Ethan Schulman of San Francisco Superior Court granted a 10-day stay before the preliminary order takes effect. If the order is upheld, Uber and Lyft could be required to reclassify drivers as employees eligible for certain benefits and protections, rather than as contractors who work for themselves.
Judge Schulman opined that Uber and Lyft use "circular" reasoning in arguing that their tech developers are employees, while their drivers are not.
"Were this reasoning to be accepted, the rapidly expanding majority of industries that rely heavily on technology could with impunity deprive legions of workers of the basic protections afforded to employees by state labor and employment laws," Schulman wrote in the order. "To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business."
The companies are likely to appeal the order.
But if this order goes through, it might be the "death knell" for Uber, says Jim Cramer.
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