Biden administration to unveil contractor rule for protecting gig workers

Biden administration to unveil contractor rule for protecting gig workers


Move will entail more benefits and legal protection

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WASINGTON (Web Desk) – In what could be a trendsetter for workers associated with gig economy worldwide, US President Joe Biden is expected to release a final rule this week, which will provide protection to them by extending the status of full employees.

The news comes weeks after European Union (EU) member states rejected a provisional deal that would have reclassified millions of gig workers as employees.

Uber and other ride-hailing companies agreed to give their French drivers a raise, with those workers now eligible for 9 euros per trip — up from 7.65 euros — along with a guaranteed income of at least 30 euros per hour and 1 euro per kilometre.

The US Department of Labour rule, which was first proposed in 2022 and is likely to face legal challenges, will require that workers be considered employees entitled to more benefits and legal protections than contractors when they are "economically dependent" on a company, Reuters says.

Moreover, it will make it more difficult for companies to treat workers as independent contractors rather than employees that typically cost a company more, an administration official said.

Read more: India plans welfare measures for gig workers ahead of elections

A range of industries will likely be affected by the rule, which will take effect later this year, but its potential impact on app-based services that rely heavily on contract workers has garnered the most attention. Shares of Uber Technologies, Lyft and DoorDash all tumbled at least 10 per cent when the draft rule was proposed in October 2022.

Shares of DoorDash closed nearly 4pc higher at $98.52 on Monday, while Lyft shares gained 5.8pc to close at $13.55 and Uber stock closed 2.5pc higher at $59.01.

In a draft version of the rule, the Labour Department had said it would consider factors such as a worker's "opportunity for profit or loss, investment, permanency, the degree of control by the employer over the worker, (and) whether the work is an integral part of the employer’s business."

The rule replaces a Trump administration regulation that said workers who own their own businesses or have the ability to work for competing companies, such as a driver who works for Uber and Lyft, can be treated as contractors.

Read more: India's women gig workers organise with WhatsApp, secret meetings 

The department's sharp break from the Trump-era regulation will likely be the focus of lawsuits challenging the new rule, legal experts have said. Federal law requires agencies to adequately explain their decision to withdraw and replace existing rules.

The Biden administration has said the Trump-era rule violated US wage laws and was out of step with decades of federal court decisions, and worker advocates have said a stricter standard was necessary to combat the rampant misclassification of workers in some industries.

The Economic Policy Institute in a report last year estimated that a truck driver treated as a contractor earns up to $18,000 less per year than one who is deemed an employee, while construction workers' earnings drop by nearly $17,000 and home health aides lose out on up to $9,500 in pay and benefits.

Business groups sharply criticized the draft rule after it was proposed. Any change in policy is expected to increase labor costs for many sectors including trucking, retail and manufacturing.

Most federal and state labour laws, such as those requiring a minimum wage and overtime pay, apply only to a company's employees, who studies suggest can cost companies up to 30pc more than independent contractors.

Nearly 40pc of US workers, or more than 64 million people, did some freelance work in the past 12 months, according to a December survey by freelancing marketplace Upwork.