Uber, Doordash plunge after Labor Department proposes change to gig worker classification

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  • The Biden Labor Department released a proposal Tuesday allowing gig workers to be reclassified as employees rather than contractors.
  • The proposed rule sent shares of gig companies like DoorDash, Lyft and Uber down.
  • It comes after a court reinstated a Trump-era rule Biden’s Labor Department tried to block, which made it easier to classify gig workers as contractors.

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Biden The Labor Department issued a proposal Tuesday that could pave the way for regulators and the courts to reclassify gig workers as employees rather than independent contractors.

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proposed ruleIf adopted, could increase costs for companies like lift, Uberinstacart and Doordash who depend on contract workers to take shifts on their schedule. Shares of Lyft fell 12% on Tuesday, while Uber lost 10.4% and DoorDash 6%.

Companies have argued that flexible schedules are attractive to workers, pointing to surveys showing the model’s popularity, which they say is made possible by the use of the independent contractor position. Some labor experts and activists disagree, however, saying that companies use the contractor model to lower their costs while denying workers important protections such as health care benefits, overtime pay and the ability to organize into unions. Huh.

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In 2020, a California law came into force that required many companies to reclassify contract workers as employees, but later that year, voters approved a proposal that called for app-based ride-hailing and delivery. Companies exempted from the law.

Last year, the Biden administration Rule made under Trump’s Labor Department canceled This would have made it easier for gig companies to classify workers as independent contractors rather than employees. But after a legal challenge, a court Trump-era rule restored,

Biden’s Labor Department said in its notice to the Federal Register that it had considered waiting longer to see how the Trump-era rule plays out. But it instead decided to go ahead with the proposed regulation because it believes that keeping the earlier rule “would have a confusing and disruptive effect on workers and businesses alike because of the separation of case law.” The description and application of a multidimensional economic reality test are the same. Testing the totality of circumstances.”

The proposed rule would allow determining whether to classify an employee as a contractor or an employee depends on a more holistic assessment, including whether the work is an “integral” part of the employer’s business. . The agency wrote that the goal is to protect workers from being unfairly classified while providing stability for businesses wishing to hire independent contractors.

The newly proposed rule will still need to make its way through a formal regulatory process, which includes giving the public time to submit comments, before it can be adopted.

Uber’s head of federal affairs, C.R. Wooters, said in a statement that the proposed rule “takes a measured approach, essentially returning us to the Obama era, during which our industry grew rapidly. In a time of deep economic uncertainty.” In the U.S., it is important that the Biden administration continues to hear from the more than 50 million people who have found earning opportunities with companies like ours.”

one in blog post On Tuesday, Lyft wrote that “there is no immediate or direct impact on the Lyft business at this time,” noting the 45-day public comment period. It added that the rule “does not reclassify Lyft drivers as employees,” and also does not oblige it to change its business model. Lyft said the rule only reverses a standard used under the Obama administration, which previously applied to its company “and did not result in a reclassification of drivers.”

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