- Lyft tanked as much as 8.5% on Thursday after the company said it will suspend service in California starting at midnight.
- The decision follows a court injunction related to the company’s classification of drivers as contractors. A California court ordered Lyft and rival firm Uber to reclassify drivers as employees.
- Both rideshare companies threatened to suspend operations in the state should the injunction take effect. Uber has yet to announce a suspension but is expected to do so.
- The tumble placed Lyft shares at their lowest levels since early May.
- Watch Lyft trade live here.
Lyft stock tumbled as much as 8.5% on Thursday after the rideshare giant said it will suspend service in California due to a court injunction related to its classification of drivers as contractors.
The order is related to a state lawsuit against Uber and Lyft for their driver classifications. California’s attorney general and three city attorneys claim the companies avoided costs by classifying workers as contractors and not employees. The court granted a preliminary injunction last week requiring reclassification.
The order was stayed for 10 days while both companies appealed the ruling, but is now set to take effect on Friday. Lyft will freeze California operations at midnight on Thursday, according to a company 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 said in the post.
Uber has yet to officially announce service suspension but is set to do so. The company previously threatened to shut down its California operations if the court ruled against it.
The slump placed Lyft shares at their lowest level since early May. Uber stock retraced losses on the news and traded slightly above its Wednesday close.
It's unclear when Lyft may resume activity in California. State legislation set to be voted on in November could allow for gig-economy companies, including Uber and Lyft, to pool cash for a fund covering contractors' healthcare, overtime, and other benefits typically reserved for full-time employees.
Lyft traded at $27.06 per share as of 1 p.m. ET Thursday, down 38% year-to-date.
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