Gig economy stocks were all the rage as companies could grow without much full-time staff. Most of their workers were part-time contractors, so companies didn't need to pay benefits. Now, that has changed. A judge recently ruled California Prop 22 was unconstitutional, which could mean bad news for stocks such as Uber Technologies (NYSE:UBER), Lyft (NASDAQ:LYFT), and DoorDash (DASH).California Prop 22 has been ruled unconstitutional. Gig economy stocks are taking a hit as a result of the news. Though gig companies probably won't have to pay comprehensive benefits and provide the extent of niceties awarded to full-time in-house employees, the ruling of Prop 22 as unconstitutional certainly won't help the bottom line of gig businesses.
In plain English, the ruling noted above means the law that permitted companies to classify rideshare drivers as contractors instead of employees has been struck down. Prop 22, previously passed by voters in the fall, was deemed unenforceable and also unconstitutional. Gig companies had spent more than $200 million supporting the law.
Now that these companies are not exempt from treating drivers as official employees, the power pendulum has swung in favor of labor. Below, I provide a look at three gig stocks investors should avoid after the Prop 22 ruling. These stocks are Uber Technologies (UBER), Lyft (LYFT), and DoorDash (DASH).