The new U.S. Department of Labor regulations would replace a Trump-era rule that lowered the bar for classifying employees as contractors, workers who are not covered by federal minimum wage laws and are not entitled to benefits including health insurance and paid sick days.
“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Secretary of Labor Marty Walsh in a prepared statement. The new rule directs employers to consider the totality of five criteria traditionally used to determine whether a worker is an independent contractor, without predetermining whether one outweighs the other. Those criteria also include the degree of permanence of the relationship between a worker and the employer and the amount of skill required for the job.
But both Uber and Lyft dismissed the potential impact of the new rule, saying that they could thrive in either scenario. “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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