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Uber and Lyft are going through a setback in relation to reclassifying employees, but it surely's removed from over

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Dara Khosrowshahi, CEO of Uber Technologies Inc., listens to a panel discussion at the Bloomberg Global Business Forum in New York, USA, on Wednesday, September 26, 2018.

Mark Kauzlarich | Bloomberg | Getty Images

Uber and Lyft have to comply with an injunction requiring them to stop classifying drivers as independent contractors until further action is taken, an appeals court ruled Thursday.

However, the order will not take effect immediately and an upcoming election could undermine the entire case.

In a unanimous decision, the appeals court ruled that the trial judge acted at its discretion to issue the injunction and upheld its order. The appellate court's decision did not deal with who should win the overall case, but said the court had "the harm that the record shows" in light of its finding that the people have a reasonable likelihood – an "overwhelming likelihood indeed." "- to assert oneself in court. "

Uber and Lyft will likely have around 60 days to petition the California Supreme Court to review the decision. Temporary redress granted to companies for the duration of the appeal process will be waived 30 days after the case is returned to the court.

Uber and Lyft have both said they would have to temporarily suspend service in California if they were forced to classify their drivers as employees. The timing of the order, however, gives Uber and Lyft one more chance to maintain their preferred California business model before the case goes any further. The companies support an election initiative, Proposition 22, that exempts app-based driving and delivery services from labor law, which California officials Uber and Lyft have violated.

"This decision makes it more urgent than ever for voters to stand with the drivers and vote yes on Prop. 22," a Lyft spokesman said in a statement. Lyft is still considering all legal options, including an appeal to the California Supreme Court.

"Today's decision means that ridesharing will be prevented from continuing to work as independent contractors if voters fail to say yes in Proposal 22, place hundreds of thousands of Californians out of work, and likely end ridesharing across much of the state." "An Uber spokesman said in a statement." We are considering our appeal options, but the stakes couldn't be higher for drivers – 72% of whom support Prop 22 – and for the California economy, where millions of people are unemployed and another 158,000 were only looking for unemployment benefits this week. ""

"The courts have really seen through their arguments," said California Attorney General Xavier Becerra in a statement. "Today's decision comes on the same day the federal government reports that more than a million Americans have applied for unemployment benefits – and 3 in 10 of them are gig workers or self-employed. But remember, companies like Uber and Lyft do that Gig classify workers as & # 39; independent contractors & # 39; do not pay into workers unemployment benefit funds, which means American taxpayers – not gig companies like Uber and Lyft – are taking on the unemployment benefits that gig workers from the COVID bailout receive. "

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Katherine Clark