A proposal released on Tuesday by the Biden Labor Department could change the way gig workers are classified. Currently gig workers are classified as an independent contractor and not an employee. The new proposed rule would drastically increase costs on companies such as Lyft, Uber, Instacart, and DoorDash whose stock prices plunged upon the announcement.
Companies like Uber, Lyft, Instacart, and DoorDash rely on a collective of independent contractors to perform delivery services as their business model. The flexible schedules these companies offer are appealing to workers and is part why the businesses are so successful.
Labor experts and activists argue that these companies are exploiting its workers because they can deny employee protections such as health care, overtime pay, and their ability to unionize.
Many of these companies and services originated in California and in 2020 aCalifornia law was passed required these independent contractors to be employees. However, the California voters spoke by passing a proposition to exempt app-based ride-hailing and delivery companies from the 2020 law.
The Biden Administration instructed their Labor Department to rescind a rule instituted by the Trump Administration to make it easier for workers to be classified as independent contractors rather than employees, but the courts overrulled the Biden Administration.
The recently proposed rule by the Biden Administration aims to make the classification process of a worker a more holistic approach with the goal of protecting workers.
In response to the Biden proposed rule, Uber’s head of federal affairs said, “in a time of deep economic uncertainty, it’s crucial that the Biden administration continues to hear from the more than 50 million people who have found an earning opportunity with companies like ours.”