An appeals court in the US state of California has ordered Uber and Lyft to classify their drives as employees rather than independent contractors.

The court sided Thursday with a lower court that said the app-based ride-hailing companies were likely violating the state’s labor law.

However both companies argue that the law does not apply to them. Uber and Lyft threatened to leave California previously if the state pushed for the driver reclassification.

The companies can appeal the bombshell ruling to the California Supreme Court.

Uber and Lyft rely on California voters as they may decide on the labor law’s future at the November ballot. If a measure called Proposition 22 passes, it will allow ride-hailing and food delivery apps to keep independent contractors status. The companies, with other app companies, have poured nearly $200 million to promote the measure.

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