The Department of Labor on Tuesday proposed a rule that would classify more gig workers as employees, not independent contractors. The rule offers hope for labor activists seeking employee status, and would be a blow to the gig-work model companies such as Uber and Lyft have relied on.
"The Department believes this proposal will help protect workers from misclassification while at the same time recognizing that independent contractors serve an important role in our economy and providing a consistent approach for those businesses that engage (or wish to engage) independent contractors," the document reads.
The proposed rule offers a test to check whether workers are employees or contractors, lowering the bar for employee classification. It would check factors such as how much control the employer has over the worker, whether the worker has opportunities to increase their earnings, and whether the work is an integral part of the employer's business. Companies are often required to provide benefits such as overtime pay or health insurance to employees but not independent contractors.
"While there is a lot of uncertainty around how federal and States will handle this latest proposal, its a clear blow to the gig economy and a near-term concern for the likes of Uber and Lyft," Wedbush analyst Daniel Ives wrote in a note to investors.
Uber, Lyft, DoorDash, Instacart, and other gig economy companies have spent millions in the political fight to continue classifying gig workers as contractors. They spent more than $200 million campaigning to pass Proposition 22, which let the companies retain contractor status for their workers in California.