The Labor Department a proposal unveiled on Tuesday, that would create additional barriers for companies looking to claim employees as independent contractors rather than employees, which some say could rethink the business models of rideshare and delivery giants.
The new rule would essentially take the form of a test, which would weigh how much control an employee has over their job, as well as the sustainability of their role. For example, employees who have less control would likely be considered employees.
If passed, the Labor Department’s initiative would be a huge victory for workers’ lawyers, who have long lobbied for better protections and benefits. It would also be a major blow to companies that rely on gig work, which claim employees prefer flexible models.
By classifying employees as contractors, companies have been able to avoid expensive benefits such as overtime pay and minimum wages. Investors have long believed that gig companies’ path to profitability would be more difficult in the face of increased regulation. It was therefore no surprise that shares of Uber, Lyft and Doordash all fell after news of the proposal.
“At a time of deep economic uncertainty, it is critical that the Biden administration continues to hear from the more than 50 million people who have found earning opportunities at companies like ours. We look forward to continued and constructive dialogue with the administration and Secretary Walsh as this process progresses,” Uber’s chief of federal affairs told CR Wooters. londonbusinessblog.com in a statement.
The proposal will be formally published on Thursday, leading to a 45-day public comment period. It would then take several months for it to be final, which means that the points in the proposal could change significantly.
In a blog postLyft said, “There is no immediate or direct impact on its business at this time.” The company denied that the rule would make Lyft reclassify its drivers as employees or change its business model. “Any new rule pertaining to independent contractor status must be informed by those who have the most influence on it: the employees. In particular, app-based work is fundamentally different from traditional 9-to-5 work. Nowhere else will you find the same minute-by-minute flexibility to decide when, where and for how long you want to earn,” the company wrote.
The Biden administration’s move appears to be long overdue. Last April, Walsh told Reuters in an interview that gig workers should be classified as employees. “We’re looking at it, but in many cases gig workers need to be classified as employees. . . in some cases they are treated with respect and in some cases they are not, and I think it should be consistent across the board,” Walsh said. in America,” he added, “but we also want to make sure that success trickles down to the employee.”