Shares of ride-sharing services including Uber (UBER), DoorDash (DASH), and Lyft (LYFT) were on an upswing in morning trading on Tuesday after a California court ruled that these companies can treat their drivers as independent contractors instead of employees. The California Court overturned a lower court’s decision in this regard.
In November 2020, Californian voters approved Proposition 22 to allow ride-sharing apps to classify drivers as independent contractors instead of employees.
However, in early 2021, the Services Employees International Union (SEIU) filed a lawsuit against this Proposition 22 and is anticipated to appeal the decision to the California Supreme Court. The Supreme Court is expected to take several months to decide on Proposition 22.
Meanwhile, ride-sharing companies have always maintained that drivers are afforded more flexibility in terms of working hours as independent contractors rather than as employees.
Lorena Gonzalez Fletcher, leader of the California Labor Federation and a former state assemblywoman commented on the Appeals Court ruling, “Today the Appeals Court chose to stand with powerful corporations over working people, allowing companies to buy their way out of our state’s labor laws and undermine our state constitution. Our system is broken. It would be an understatement to say we are disappointed by this decision.”
For investors wanting to gain exposure to the transportation sector, the iShares U.S. Transportation ETF (IYT) is a viable option. IYT has climbed by around 3.5% year-to-date.