Lyft President John Zimmer told CNBC’s Jim Cramer on Monday he is confident the ride-hailing company will overcome the latest legal obstacle that threatens its operating model.
The most recent hurdle came Friday, when a California judge ruled against a ballot measure approved last year by voters in the state known as Proposition 22. It exempted drivers for companies like Uber and Lyft, as well food-delivery firms, from California labor law that tried to ensure they were classified as employees, not independent contractors.
The judge, Alameda County Superior Court Judge Frank Roesch, wrote in his ruling that Proposition 22 violates California’s state constitution because “it limits the power of a future Legislature to define app-based drivers as workers subject to workers’ compensation law.” As a result, Roesch contended, the entire ballot measure cannot be enforced.
Protect App-Based Drivers and Services Coalition, which backs Preposition 22, told Reuters it is appealing Roesch’s decision.
“As this goes to higher courts, the appeal court in California, we’re extremely confident that the proposition will be upheld,” Zimmer, who also co-founded Lyft, said in an interview Monday on “Mad Money.”
Lyft, Uber and other businesses in the so-called gig economy such as DoorDash spent millions of dollars in favor of the initial ballot measure, which in November passed with nearly 59% of California voters supporting it.
The companies had warned that classifying drivers as employees would lead to higher operating costs — such as needing to pay into unemployment insurance — that would, in turn, be passed onto consumers through price increases for services.
Lyft and Uber have struggled to consistently achieve profitability throughout their histories, but both are trying to get there. Investors are looking for progress on those goals, which would be complicated by needing to adjust their business models on driver classification.
As a result of Roesch’s ruling Friday, though, Zimmer said there will be “no change” to Lyft’s operations in California.
Asked by Cramer if Lyft expected to have progress on the appeal within roughly six months, Zimmer responded: “It’s hard to predict legal processes fully, but we’re optimistic that within that timeframe we’ll get a more final resolution.”
Lyft shares rose nearly 3% Monday, finishing at $47.24 apiece. Uber also closed higher for the session, advancing 2.6% to $41 per share.