by Daniel Wiessner, Nandita Bose and David Shepardson
WASHINGTON, Oct 11 (Reuters) – The U.S. Labor Department on Tuesday proposed tougher rules governing companies’ use of independent contractors, a reform that could undermine the business model of some chauffeur-driven passenger vehicle specialists or meal delivery.
The news caused Uber and Lyft’s stock prices to drop more than 15% on Wall Street.
The Biden administration’s plan would require a company to treat self-employed workers as employees, in terms of benefits and legal protection in particular, when they are “economically dependent” on it.
The Department of Labor specifies that the criteria determining the status of a worker will include his ability to generate profits, the permanent aspect of his employment and the degree of control that a company exercises over his activity.
Currently, most federal and state laws, such as minimum wage and overtime, apply only to company employees. And according to some studies, an independent contractor can cost the company up to 30% less than an employee.
Labor Secretary Marty Walsh said in a statement that companies often mistakenly treat some vulnerable workers as independent contractors.
“Misclassification deprives workers of federal welfare, including their right to receive all legally earned compensation,” he added.
The new regulations, which will take at least several months to implement, would replace those put in place during Donald Trump’s presidency, according to which a worker who owns his own company or who can work for several competing companies (a driver who works for Uber and Lyft, for example), can be treated as a processor.
More than a third of working people in the United States, or nearly 60 million people, have derived at least part of their income from self-employment in the past 12 months according to a study published last December by the company specialized in Upwork.
Several employers’ federations, such as the US Chamber of Commerce, the National Association of Home Builders (NAHB) or the National Retail Federation have had discussions with the White House in order to obtain that the project is more business-friendly.
They claim that a rule that is too broad would penalize workers who wish to remain independent and retain some flexibility. (Reporting David Shepardson and Nandita Bose in Washington, Daniel Wiessner in Albany; French version Marc Angrand, editing by Kate Entringer)