The US Department of Labor withdrew a Trump-era rule that would have made it easier for “gig economy” companies like Uber and Lyft to classify their workers as independent contractors. The reversal doesn’t change any gig workers’ current employment status, but it does signal that the Biden administration is taking a less friendly stance toward this sector of the economy.
The rule was finalized in early January, before Biden took office, and would have made it more difficult for gig workers to be reclassified as employees under federal law. Over the years, some gig workers have fought to be classified as employees so they could qualify for benefits like paid sick leave, health insurance, and minimum wage.
“Stop the erosion of worker protections”
Among the reasons cited for reversing the rule, the labor department said it was “in tension” with the Fair Labor Standards Act of 1938 and would have “undermined” current jurisprudence on gig work in the US.
“By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” said Secretary of Labor Marty Walsh in a statement.
Uber, Lyft, DoorDash, and other companies won a huge victory last November with the passage of Prop 22 in California. The ballot measure would exempt those companies from a state law that would have required them to classify their workers as employees. The companies aggressively opposed the law, arguing it would eliminate worker flexibility, while also increasing consumer prices and wait times.
Biden opposed Prop 22, arguing it was an attempt by gig economy companies to “gut” California’s AB5 law. “It’s unacceptable,” he tweeted on May 26th, 2020.
Among the gig economy companies, Uber has been the most forceful about taking its vision for the future of work to the national stage. The company has long advocated for a “third way” to classify its drivers. Last spring, in the midst of rising COVID-19 infections, Uber CEO Dara Khosrowshahi penned a letter to President Trump advocating for federal legislation that would provide drivers with certain financial benefits while still classifying them as independent contractors. And the company has been lobbying for Prop 22-like legislative action in multiple states across the country.
But that could be tough to accomplish with Democrats in control of the government. Last September, a coalition of top Democratic officials introduced a bill that would tighten the federal test for classifying workers as independent contractors.