The Biden-Harris administration has proposed a rule challenging existing worker classifications that could change the nature of the gig economy in the U.S. by redefining guidelines to fit current labor standards.
The proposal, announced by the Department of Labor (DOL) on Tuesday, is an attempt to rescind the 2021 Independent Contractor Rule and tighten up current definitions and classifications of workers to fit more in line with those found in the Fair Labor Standards Act.
Essentially, if passed into formal regulation, it may be much easier for independent contractors to be considered company employees and, hence, be afforded the benefits that come with “employee” status, like guaranteed minimum hourly wages, overtime pay, worker’s compensation and unemployment insurance.
According to CNN Business, while the Department of Labor anticipates changes to worker classifications throughout the home care, trucking and hospitality industries, the proposal may specifically and negatively impact the wildly popular ride-sharing giants like Uber and Lyft and delivery services like DoorDash and Uber Eats. All those working in construction and as self-employed freelancers will also keep an eye on future developments.
“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Secretary of Labor Marty Walsh in a DOL press statement.
“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages,” Walsh added. “The Department of Labor remains committed to addressing the issue of misclassification.”
The current Independent Contractor Rule, adopted by former president Donald Trump in 2021, favored businesses that keep labor costs down by hiring workers as independent contractors without having to pay the payroll taxes that cover Social Security and unemployment benefits, per CNBC.
Businesses are likely to challenge the rule in court aggressively. Quoted by Reuters, Michael Lotito, a San Francisco-based lawyer who represents employers and business groups, said, “There’s going to be years of litigation over this. This has Supreme Court written all over it.”
According to the Washington Examiner, news of the proposed rule dropped stock prices across all ride-sharing and delivery companies Tuesday morning. Uber and Lyft stocks dropped 14.6% and 13% respectively, while DoorDash fell approximately 10%. Other relevant losses included freelance talent marketplace Upwork, which dipped down about 4%, and handmade and vintage e-commerce company Etsy, which tumbled more than 6%.
DOL’s Wage and Hour Division already solicited feedback from stakeholders on the preliminary proposal and is now inviting comments from any interested parties from Oct. 13 to Nov. 28, 2022. Rule responses can be submitted online.
Source: GoBankingRates
