Lyft Inc. is suspending its operations in California ahead of a law that would require drivers to be reclassified as employees rather than independent contractors.
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Shares of the San Francisco-based ride-sharing company, which were already trading lower, plunged to session lows on the news.
TickerSecurityLastChangeChange %LYFTLYFT INC.27.04-1.10-3.93%
The new classification would mean companies like Lyft and Uber Technologies Inc. would have to treat so-called gig workers more like full-time employees and provide them with benefits, making their employment more expensive.
“At 11:59PM PT today our rideshare operations in California will be suspended,” the company said in a blog post. "This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips."
The company has for years provided drivers with a minimum earnings guarantee and a health care subsidy while allowing them the flexibility of being independent contractors, something they want.
Lyft said the new law will cause 80% of drivers to lose work and result in the rest having scheduled shifts and a cap on hourly earnings.
The law would also make it more expensive for riders in low-income areas that are faced with few transit options, the company said.
Lyft earlier this month reported ridership fell 60% year-over-year in the three months through June as stay-at-home orders aimed at slowing the spread of COVID-19 eliminated non-essential travel.
Shares were down 35% this year through Wednesday, lagging the S&P 500's 4.46% gain.