(Reuters) - A California appeals court on Thursday avoided a shutdown of ride-hailing services in the state by halting a lower court order that would have forced Uber Technologies Inc (UBER.N) and Lyft Inc (LYFT.O) to treat their drivers as employees.

The companies had said they would be unable to comply with a new law that would consider their drivers employees entitled to benefits such as minimum wage, overtime and sick pay and unemployment insurance.

Lyft shares were up almost 9% after the last-minute ruling, and Uber shares were up 6.4%.

The threat to suspend service in the most populous U.S. state marked an unprecedented escalation in a long-running fight between regulators, labor groups and gig economy companies that have upended traditional employment models around the world.

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