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US: New rules could mean big changes for gig economy

October 12, 2022

Companies including Lyft, Uber and DoorDash could soon be forced to classify some gig workers as employees, giving them more benefits and rights in the US.

A DoorDash agent seen in New York
People working for app-based companies are likely to be affected by the rulesImage: John Marshall Mantel/ZUMA/picture alliance

The US government on Tuesday proposed a rule change that could make it more difficult for companies to classify gig workers as independent contractors. This would mean better benefits and access to minimum wages for the workers.  

A 45-day public comment period for the rules begins on Thursday. 

Millions in the United States are hired for "gig" jobs, especially in the restaurant, construction, and healthcare industries. The change is expected to shake up ride-hailing and delivery-based companies such as Uber, Lyft, DoorDash and others who rely almost entirely on gig workers. 

What does the proposal include?

The suggested changes would require workers to be labeled as employees when they are "economically dependent" on a company, giving them more benefits and legal protections compared to the contractor status. The new rule is expected to come into effect next year.  

It directs employers to consider six criteria for determining whether a worker is an employee or a contractor. The criteria include the degree of control by the employer, whether the work requires special skills, the degree of permanence of the relationship between worker and employer and the investment a worker makes, such as car payments. 

Currently, most federal and state labor laws only apply to company employees. These include minimum wage and overtime pay.  

Employees can cost companies up to 30% more than independent contractors, studies show. 

"Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages," US Labor Secretary Marty Walsh said in a statement. 

EU moves to improve conditions for gig workers

The proposed rule would replace a regulation put in place by former President Donald Trump's administration, which said workers who own their business or have the ability to work for competing companies — such as Uber and Lyft drivers — can be treated as contractors. 

The new rule has similarities with legal guidance issued during the Obama administration. It incorporates rules similar to those in some US states, including California, under which most workers are entitled under state wage laws.  

What was the reaction from businesses?

The National Retail Federation on Tuesday said it "staunchly opposes a change."

App-based companies say their workers want the flexibility to set their own hours as contract workers. 

Shares of the ride-hailing company Lyft and Uber fell about 12% and 10%, respectively. Both companies have dismissed any severe impact from the changes.  

"Today's proposed rule takes a measured approach, essentially returning us to the Obama era, during which our industry grew exponentially," CR Wooters, head of federal affairs at Uber, said in a statement.

In a blog post, Lyft said they had expected this since the start of the Biden administration. The rule "does not reclassify Lyft drivers as employees" and "does not force Lyft to change our business model," the company said.

tg/dj  (AFP, AP, Reuters)