Cab companies in the US state of California will now be required to convert their drivers from “independent contractors” to employees after a judge ruled in favour of drivers. As part of this, the employees can now avail benefits in the state.

Uber Technologies Inc and Lyft Inc were ordered by a judge on Monday, and plan to appeal the injunction. If they become categorised as employees, the companies will have to offer overtime, healthcare among other benefits.

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This comes in the backdrop of Assembly Bill 5, a California labour law which took effect this year and says that workers can be considered contractors only if they undertake tasks that fall outside the usual course. It is being seen largely as a threat to the cab industry in the challenging times of COVID-19, when most people have been advised to stay indoors and to avoid contact with other human beings.

In the quarter that ended in June, Uber reported a 67 per cent decline in the their revenues.

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San Francisco’s Superior Court Judge Ethan Schulman and California Attorney Gen Xavier Becerra are on the same page about employee rights and cab hailing industry. They felt that the companies were directly violating Assembly Bill 5. Both Uber and Lyft have 10 days to appeal this decision.

An analysis by Uber revealed that if drivers were considered employees, the prices of rides would shoot up tremendously. San Francisco alone would witness a 30 per cent jump in prices, while the less-populated areas like InlandEmpire could see a 120 per cent spike.