California's decision to pass legislation that reclassifies gig workers as employees sounds expensive for ride-hailing companies Uber and Lyft.

If hundreds of thousands of drivers receive protection such as minimum wages and paid time off, operating losses will soar.

Leaving California is not an option. Deutsche Bank estimates California accounts for one-fifth of Lyft's bookings. For Uber, which has drivers around the world, it is around 6 per cent.


Driver employment status was flagged as a risk when both companies listed this year.

Even so the timing is bad. Both are under pressure to cut costs. Their shares