In one key change, employers are required to consider whether the work provided is an integral part of their business. That could affect app-based companies that rely almost entirely on freelance workers to provide their services. The Trump-era rule had narrowed that criteria to whether the work in part of an integrated unit of production, and gave more weight to other considerations such as the worker's opportunity to make a profit or loss.
The rule could bolster labor advocates seeking to challenge worker classification in courts, or state lawmakers seeking to pass stricter laws for designating workers as contractors, said Patricia Campos-Medina, executive director of the Worker Institute at Cornell University's School of Industrial and Labor Relations.
"I don't think it will stop the debate," Campos-Medina said. "The only thing the federal rule does is it creates a basic standard for evaluation." Wedbush analyst Dan Ives said the proposal would constitute a major change for workers and employers from previous years. "Importantly this rule: Does not reclassify Lyft drivers as employees. Does not force Lyft to change our business model," the company said.
In 2020, California voters overwhelmingly approved a proposition to exempt drivers for app-based companies from a state law requiring them to be designated as employees. Uber, Lyft and other companies had spent $200 million campaigning in favor of the proposition. However, a judge struck down the ballot measure as unconstitutional last year, setting up a legal fight that could end up in the California Supreme Court.
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