The U.S. Department of Labor on Wednesday finalized a rule that could be a boon for app-based gig businesses, while potentially costing U.S. employees billions of dollars in lost wages and benefits.
The rule establishes a test for determining independent contractor status under the Federal Labor Standards Act, which gives more weight to two of five factors, which critics say are favorable to performance firms such as Uber Technologies Inc. UBER and Lyft Inc. LIFT: “the nature and degree of control over the work over the work, and the workers’ chance of profit or loss based on initiative and / or investment. The other factors are skill, the stability of the working relationship and whether the work is part of an integrated production unit.
“This rule brings clarity to U.S. workers and employers,” U.S. Secretary of Labor Eugene Scalia said in a statement.
The rule was proposed in September and its comment period was shortened to 30 days instead of 60 days, which critics say was the Trump administration’s attempt to push it through before the end of its term. It is expected to take effect on March 8, the Department of Labor said in a news release.
The proposal received 1,825 comments, including from the Economic Policy Institute, which estimates that the rule workers – from delivery and transport workers to those working at call centers, in agriculture, home health care and elsewhere – at least $ 3.7 billion per years will cost. in payment and benefits.
“This loss of workers consists of at least $ 400 million in new annual paper costs, and a transfer to employers of at least $ 3.3 billion in the form of reduced compensation,” writes Heidi Shierholz, senior economist at EPI and director of policy. “Furthermore, social insurance funds will lose at least $ 750 million annually in the form of reduced employer contributions, which means that this rule will also result in a transfer of at least $ 750 million per year from social insurance funds to employers.”
Two dozen state attorneys general and officials from New York, Chicago, Pittsburgh and Philadelphia have asked the Department of Labor to withdraw the rule, while business groups and chambers of commerce support the rule change.
Opponents are optimistic that President-elect Biden’s incoming government will be able to stop the rule from coming into force and eventually repeal it. Biden expressed support for different criteria for determining workers’ classification, the so-called ABC test, which is a law in California but not for gig companies, which successfully supported a vote measure to get them in November from to release the law.
For more: Uber and Lyft win battle to keep managers as contractors instead of employees in California
‘[The Biden administration] will want their own rule, but it has to be made public for comment, and that, of course, will take a while, ‘said John Logan, a professor at San Francisco State University’s Labor and Employment Studies Department.
Among those benefiting from this are Uber, Lyft and other performance companies, which have faced challenges nationwide over the treatment of managers and delivery workers as contractors.
Nicole Moore, a Los Angeles organizer with Rideshare Drivers United, said: ‘Let’s be clear. Taking away labor rights from app-based workers is the agenda of the Trump administration that never had the interests of front 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 we are making to modernize our country’s laws and look forward to working with policymakers to advance this vision,” Uber, head of federal affairs Danielle Burr, said in a statement.
The incoming Biden administration did not return a request for comment. Lyft did not return a request for comment.