The U.S. Department of Labor finalized a rule Wednesday that could be a boon to app-based gig companies, while potentially costing U.S. workers billions of dollars in lost wages and benefits.
The rule establishes a test for determining independent contractor status under the Federal Labor Standards Act, giving more weight to two of the five factors that critics say are favorable to gig companies such as Uber Technologies Inc. UBER and Lyft Inc. LYFT: “The nature and degree of employee control over the work, and the employee’s likelihood of gain or loss based on initiative and / or investment.” The other factors include skill, consistency of the working relationship, and whether work is part of an integrated production unit.
“This rule gives US workers and employers the long-needed clarity,” US Secretary of Labor Eugene Scalia said in a statement.
The rule was proposed in September, and the comment period was shortened to 30 days instead of 60 days, according to critics the Trump administration’s attempt to speed it up before the end of its term. It is expected to go into effect on March 8, the Ministry of Labor said in a press release.
The proposal received 1,825 comments, including from the Economic Policy Institute, which estimates that the rule will cost employees – from delivery and transportation workers to those working in call centers, agriculture, home care and elsewhere – at least $ 3.7 billion a year. in wages and benefits.
“This loss to employees consists of at least $ 400 million in new annual paperwork costs, and a transfer to employers of at least $ 3.3 billion in the form of lower compensation,” said Heidi Shierholz, EPI’s senior economist and policy director. “Further, social insurance funds would lose at least $ 750 million annually in the form of reduced employer contributions, meaning that this rule also results in a transfer of at least $ 750 million per year from social insurance funds to employers.”
Two dozen attorneys general and officials from New York City, Chicago, Pittsburgh and Philadelphia asked the Labor Department to repeal the rule, while business groups and chambers of commerce backed the rule change.
Opponents are optimistic that President-elect Biden’s new administration could prevent the rule from taking effect and eventually repeal it. Biden has expressed support for several criteria for determining the employee classification, the so-called ABC test, which is a law in California, but not for gig companies, which successfully backed a vote to release them from the law in November set.
For more: Uber and Lyft win the battle to keep drivers as contractors instead of employees in California
“[The Biden administration] want their own rule, but should open it up to public comment and of course that would take some time, ”said John Logan, professor in San Francisco State University’s Department of Labor and Employment Studies.
Among those who would benefit are Uber, Lyft and other gig companies, who have faced challenges across the country regarding their treatment of drivers and delivery drivers as contractors.
Nicole Moore, a Los Angeles-based organizer at Rideshare Drivers United, said, “Let’s be clear. Taking labor rights away from app-based workers is the Trump administration’s agenda that has never kept the interests of frontline workers in mind. But this is not concrete and the new government has the power to usher in a better future for all workers. “
“We appreciate the efforts that have been made to modernize the laws of our country and look forward to working with policymakers to advance this vision,” Danielle Burr, Uber’s chief of federal affairs, said in a statement.
The incoming Biden administration did not return a request for comment. Lyft did not return a request for comment.