Uber and Lyft certainly won’t be happy about this, but the New York Times reports that the Labor Department has issued a proposal that would make it significantly easier for rideshare drivers to be considered employees. Along with stronger worker protections, drivers would also get company benefits they currently don’t have access to as contractors.
As the article describes it:
The proposed rule is essentially a test that the Labor Department will apply to determine whether workers are contractors or employees for companies. The test considers factors such as how much control workers have over how they do their jobs and how much opportunity they have to increase their earnings by doing things like offering new services. Workers who have little of either are often considered employees.
The new version of the test lowers the bar for that employee classification from the current test, which the Trump’s administration’s Labor Department created.
That said, the new test won’t make Uber and Lyft drivers full employees overnight. The Labor Department has authority to enforce things like minimum wage and overtime laws, but the IRS and individual states have their own rules. You would think most other regulators would defer to the Labor Department when updating their own policies, but it’s not a guarantee. Still, it’s a step in the right direction.
“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors. Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages,” said Secretary of Labor Marty Walsh in a statement.
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You can also expect Uber, Lyft and other gig-economy companies to try to fight the new test. After all, they’ve fought regulations for years and have worked to get legislation passed that ensures their drivers remain classified as independent contractors.
For example, when California passed AB5, a law that imposed a strict standard for classifying someone as an independent contractor, they pushed back hard. They then spent hundreds of millions of dollars on a deceptive campaign to get Proposition 22 passed, a law that would allow app-based rideshare and delivery companies to hire drivers as independent contractors. That law has since been struck down.