The companies had said they would be unable to comply with a new state law that would consider their drivers employees entitled to benefits such as minimum wage, overtime and sick pay and unemployment insurance instead of independent contractors.
Thursday’s last-minute ruling, in a case with potential ripple effects across the global gig economy, means drivers can continue working as independent contractors while the appeals courts consider the question of driver status.
But the court, which has scheduled arguments in the case for Oct. 13, is not likely to rule before a Nov. 3 ballot measure puts the decision into the hands of California voters.
Lyft, Uber, DoorDash, Instacart and Postmates are spending more than $110 million to support the ballot measure, known as Proposition 22, that would enshrine drivers’ contractor status, albeit with some added benefits, and overwrite the state’s gig worker bill.
Lyft Inc shares were up 5.7% after the ruling, and Uber Technologies Inc shares were up 6.7%.
The threat to suspend service in the most populous U.S. state marked an unprecedented escalation in a long-running fight between regulators, labor groups and gig economy companies that have upended traditional employment models around the world.
“We are glad that the Court of Appeals 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 in a statement also welcomed the court’s intervention.
“While we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers,” the company said in reference to the November ballot initiative.
The office for California Attorney General Xavier Becerra, who had sued the companies for not complying with the state’s gig worker law, did not immediately respond to a request for comment.
The companies had sought the intervention of the California First District Court of Appeal in San Francisco to block an injunction order issued by a judge last week. That ruling forced the companies to treat their drivers as employees starting Thursday after midnight.
Uber and Lyft say the vast majority of their drivers do not want to be employees, with some 80% working less than 20 hours per week. The companies say their flexible on-demand business model is not compatible with traditional employment law and advocate for what they call a “third way” between employment and contractor status.
Under the “third way” proposal outlined in the ballot measure, drivers would receive a health care stipend, a minimum wage, expense reimbursements as well as medical and disability coverage for injuries on the job.
Labor groups reject the companies’ claims that current employment laws are not compatible with flexible work schedules and argue the companies should play by the same rules as other businesses. They say the companies’ ballot measure would create a new underclass of workers with fewer rights and protections.