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Uber and Lyft’s Shares Take a Hit in Anticipation of New Law

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The stock prices of the ride-sharing companies Uber and Lyft took a hit ahead of the likely passage of a new California law that would potentially upend their business model. Share and Share Alike The proposed law would reclassify the companies’ drivers from independent contractors to employees. This change, advocates say, would protect drivers by giving them a guaranteed minimum wage, as there is currently no minimum that drivers are guaranteed to take in, as well as granting them the right to paid leave. The way that ride-sharing services treat and compensate their employees has been a matter of heated debate between drivers, labour activists, and the companies for the past several years, and if the law does pass, it would be a major win for the side of drivers. Drive Away Uber and Lyft have a pretty famous rivalry, but the two companies were able to bury the hatchet to come out together against the proposed law. The companies claim this would hurt their business model by increasing their taxes, and would also force them to provide their drivers with benefits such as unemployment insurance, social security and Medicare, all of which eats into the bottom line. The companies have argued that a minimum wage would hurt their drivers’ flexibility because the companies would have to limit the amount of shifts that drivers can work. Compromise Uber and Lyft tried to compromise with California legislators by proposing a minimum wage of $21 per hour of driving, as well as benefits such as sick and holiday pay and the ability to organize, but the law is considered likely to pass. Both companies have struggled since their initial public offerings, and the likeliness of the new law going into effect, as well as the strong possibility that other states will follow suit, has dinged both companies’ stock prices. Lyft shares have dropped 7.3% and Uber shares fell 5.7%. -Michael Tedder Photo by Adobe {UBER, LYFT, NASDAQ}