Uber, Lyft Win Delay on Converting Drivers to Employees

Uber Technologies Inc. andLyft Inc. were spared from having to rapidly convert their California drivers to employees after a state appeals court agreed they can keep their business models in place while challenging a judge’s order to comply with a state labor law.

The decision Thursday is a big reprieve for the ride-hailing companies, whose leaders said they might need to temporarily shut down in their home state if forced on short notice to provide drivers with costly benefits including health insurance and overtime. The appeals court scheduled arguments for Oct. 13.

Lyft shares rose as much as 8.7% on the news, while Uber’s stock gained 7.75%.

“We are glad that the court of pppeals recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want,” Uber said in a statement.

Lyft didn’t immediately respond to a request for comment.

The delay buys time for the companies as they campaign for a ballot measure set for a statewide vote in November that would free app-based transportation and delivery companies from the sweeping requirements of the law known as Assembly Bill 5.

Proposition 22 exempts the companies from paying for full benefits that employees currently get under California law, such as unemployment insurance and complete workers compensation, while requiring them to pay 120% of minimum wage, health care contributions and medical and disability coverage, among others.

San Francisco Superior Court Judge Ethan Schulman had refused on Aug. 13 to indefinitely pause the injunction he issued earlier in the week.

Read More: Uber’s Legal Strategy on Driver Fight: Delay, Appeal to Public

— With assistance by Anne VanderMey, and Lizette Chapman

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