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UBER Gains Despite Court Ruling Prop 22 as Unconstitutional

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Shares of Uber Technologies UBER closed yesterday’s trading session 2.6% higher after declining in early trading following a California court ruling late Friday that Proposition 22 (Prop 22), a ballot initiative which allowed the company to retain the independent contractor status for its drivers, was unconstitutional. Shares of the company’s rival Lyft LYFT also closed Monday’s session higher after dipping early morning. The move, which threatens to alter Uber's and Lyft’s operating structure in California by raising their labor costs, does not seem to have affected investors much.

Prop 22 was passed by California voters in November 2020 with a majority support of 58%, thus exempting gig economy companies like Uber and Lyft from the California state law, which would have forced the companies to reclassify their drivers as employees entitled to worker benefits, such as overtime pay, healthcare benefits, unemployment and workers' compensation. The measure, however, offers drivers with a number of worker benefits, including a certain amount of guaranteed earnings, a healthcare stipend and accident insurance for on-the-job injuries.

Per a CNBC report, Alameda County Superior Court Judge Frank Roesch regarded Prop 22 as unconstitutional since “it limits the power of a future Legislature to define app-based drivers as workers subject to workers’ compensation law.” Hence, the entire ballot measure is “unenforceable.”

Uber Technologies, Inc. Price

Uber Technologies, Inc. Price
Uber Technologies, Inc. Price

Uber Technologies, Inc. price | Uber Technologies, Inc. Quote


A coalition representing Uber, Lyft and other such gig companies, plans to appeal the ruling. Proponents are confident that Prop 22 will be upheld and said that the ruling will be immediately stayed upon appeal. Drivers are said to remain as contractors as per provisions of Prop 22 until the appeal process is complete.

Recently, gig companies including Uber, Lyft and DoorDash DASH have taken measures to put a similar proposal before Massachusetts voters next year, aimed at retaining the independent contractor status for their drivers.

While Uber and Lyft carry a Zacks Rank #3 (Hold), DoorDash carries a Zacks Rank #4 (Sell).

A Key Pick

A better-ranked stock in the Internet - Services industry is Shopify SHOP, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Shopify have rallied more than 42% in a year’s time.


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Shopify Inc. (SHOP) : Free Stock Analysis Report

Lyft, Inc. (LYFT) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

DoorDash, Inc. (DASH) : Free Stock Analysis Report

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