Frank Roesch, Alameda County Superior Court Judge, ruled that Proposition 22 is unconstitutional.
After Lyft, Uber and other services spent $200 millions in support of the measure, the November vote approved it. It was the most expensive state ballot measure in history.
Uber stated it would appeal the decision, setting up a fight which could end up at the California Supreme Court.
Noah Edwardsen, a company spokesperson, stated that "this ruling ignores and defies logic and the law." "You don’t have to believe us: Proposition 22 was defended by California's attorney general in this case."
He stated that the measure would remain in effect pending appeal.
In a lawsuit claiming that the measure removed the ability of the state Legislature to grant workers access to state workers' compensation, the judge sided with three drivers as well as the Service Employees International Union.
"For over two years, drivers have said that democracy can't be bought. "And today's decision proves they were right," stated Bob Schoonover, president and CEO of the SEIU California State Council.
Proposition 22 protected app-based ride-hailing companies and delivery firms from labor laws that would have required them to treat drivers like employees, and not as independent contractors. Drivers are exempted from receiving benefits such as unemployment insurance or paid sick leave.
Uber and Lyft threatened with leaving the state if the measure was rejected by voters.
To challenge the proposition, Labor spent approximately $20 million.
In February, the state Supreme Court declined to hear the case primarily on procedural grounds. However, it left the door open for a lower court challenge.