Oct 13, 2022
The Labor Administration's proposed rule could designate contractors as employees.
Titan's Takeaway: If enacted, the new proposal could have financial implications for businesses that rely on contract workers, such as ride-sharing and food-delivery apps. That being said, we are hopeful that thoughtful discussions will lead to a solution that is beneficial for all parties involved.
On Tuesday, the Biden Labor Administration released a proposal that, if enacted, would start the process for both courts and regulators to designate gig workers as employees, instead of contractors. The announcement affects some sectors more than others, most notably food delivery and transportation. Uber, Lyft, and DoorDash all saw falling shares – with Lyft down 10%, Uber falling 8%, and DoorDash taking a 6% plunge.
For corporations that rely on contract workers, such as ride sharing companies, the potential of having to employ them full time and offer the corresponding benefits – healthcare, overtime, union organization – raises operating costs and could slim profit margins. Opponents of the proposal also point to the flexible hours offered by contracting as justification for holding off on employee status. But for labor experts, flexibility does not supersede the federal labor protections employee status can offer.
The goal of the Biden administration's alternative proposal is to protect workers from being classified improperly while also allowing businesses to employ private contractors where appropriate. Feelings are divided among workers, as well. Some prefer the flexibility of being an independent contractor, while others advocate for the security and benefits that come with being an employee.
How this will affect gig-based businesses is yet to be fully seen. In a blog post on Tuesday, Lyft assured the public that the proposal has no immediate impact on the business at this time and that the rule does not reclassify workers, but rather revert the standard to Obama-era practices.
Concern remains that the economy and labor markets of 2022 are not the same as that of the mid 2010s, but hopefully public comment and deliberation on the best version of the proposed rule can make both employers and – ideally – employees very happy.