A judge from California has ordered Uber and LYFT to prohibit drivers on their platforms from being identified as independent contractors in California. The judge said the two companies need to identify drivers as regular employees with benefits. The court’s ruling is an initial failure for Uber and LYFT, two odd industry enterprises. Identifying drivers as regular employees will have a huge impact on their business models.

the judge made the ruling on Monday, but it will not be the final decision, because both companies are expected to appeal against the far-reaching preliminary injunction. The judge’s ruling is likely to cause Uber and LYFT to suspend their services and try to adapt their business models to the judge’s order.

California’s labor law came into effect this year, and state officials filed lawsuits against Uber and LYFT under the new labor law. This is the most serious legal threat to the casual labor economy so far, and it comes at a time when the online car Hailing business is in trouble. Affected by the new coronavirus epidemic blockade order, as people stay at home most of the time to avoid the epidemic, the demand for taxi services plummeted, and Uber’s losses expanded. In the second quarter of this year, the company’s taxi business revenue fell 67%.

affected by the news, some of the gains in LYFT’s shares were erased on Monday, and Uber’s share price fell by about 2%. LYFT will release its latest financial report on Wednesday.

San Francisco high court judge Ethan Schulman will make the ban effective in 10 days, leaving time for the two companies to appeal.

Uber analysts said that if drivers were identified as regular employees, Uber’s taxi fares in San Francisco would increase by up to 30%, while in areas with a small population and low demand, taxi fares could be increased by up to 120%.

Schulman agreed with Xavier Becerra, California’s attorney general, that Uber and LYFT violated parliamentary Act No. 5, which stipulates that in general, workers can be classified as contractors only if they perform their duties outside the normal course of the company’s business. If the two companies have to identify drivers as regular employees, the company will bear overtime, medical expenses and other benefits, which will increase the operating costs of the enterprise.

like other Californian judges, Schulman doubted that companies identified drivers as contractors, saying it was “against economic reality and common sense.”.

Uber and LYFT both said that most of their drivers preferred to be identified as contractors. “Most drivers want to work independently,” a Uber spokesman said in a statement. When more than three million Californians are out of work, our elected leaders should focus on creating jobs, rather than trying to shut down the entire industry in a recession. ”

a law professor who has been following the case said this week’s ruling will be an important turning point. Charlotte garden of the University of Seattle said: “Uber and LYFT often imply that drivers lose job flexibility if they are identified as employees, but California law does not exclude flexible employment. What these companies really mean is that they may make a commercial decision to change the working conditions of drivers in response to parliamentary Act No. 5. ”

so far, odd economy companies, including Uber and LYFT, have invested a total of US $110 million to promote a vote, which will be submitted to the public in November to protect their drivers from the influence of Parliament Act 5, and promise drivers that the company will replace regular employees with other benefits.

LYFT said in a statement: “ultimately, we believe that the matter will be decided by California voters, who will be on the driver’s side.”

at a hearing held on August 6, LYFT lawyers said that the ban sought by becra would damage the services of these enterprises and cause “great harm” to drivers and passengers.

Uber and LYFT are both headquartered in San Francisco, and the city has joined Becca’s lawsuit. The city of San Francisco believes that by violating California labor laws, the two companies have grown into giants, while drivers on their platforms have suffered for years.