Updated Jan 9, 2024 - Business

Biden administration revamps gig worker rule

Delivery workers wait for orders at a Chick-fil-A restaurant in New York last year. Photo: Michael Nagle/Bloomberg via Getty Images

The Biden administration announced a final rule on Tuesday that makes it harder to classify workers as independent contractors — a victory for gig workers that could shift the business models of companies that rely on them.

Why it matters: The rule, which takes effect in March, requires businesses to extend the benefits and protections offered to employees to other workers that may no longer fit the status of a contractor.

  • The fresh standard, first proposed in 2022, faced pushback from business groups — stoking the ongoing war over how gig workers should be classified (and ultimately paid) in the fast-growing on-demand economy.

Details: The rule says a worker should be classified as an employee under federal law based on multiple factors, including the degree of control an employer has over a person's work and the permanence of the work relationship.

  • The Labor Department also on Tuesday rescinded a Trump-era rule that allowed more workers to be classified as independent contractors.
  • That rule said that workers able to work for several companies at one time and who run their own businesses could be deemed contractors.

Catch up quick: Unlike employees, independent contractors are not entitled to the full minimum wage, overtime pay, unemployment insurance and workers' compensation.

  • "These labor protections are a promise of a floor, beneath which no one should be forced to live and work," Acting Labor Secretary Julie Su told reporters.
  • "Misclassification, the practice of calling someone an independent contractor when they are actually an employee, is a breach of that promise."

Flashback: Share prices of gig companies like Uber and Lyft tanked after the Labor Department first unveiled the proposed rule in October 2022 — a reflection of investor jitters that the new standard would result in higher labor costs for the companies.

What they're saying: Uber does not anticipate the revamped rule will impact how its drivers are classified.

  • The rule "does not materially change the law under which we operate, and won't impact the classification of the over one million Americans who turn to Uber to make money flexibly," said CR Wooters, Uber's head of federal affairs, in a statement.

The bottom line: Labor Department officials say workers are incorrectly designated as independent contractors across a slew of industries.

  • "The department is seeing misclassifications in places it hasn't seen it before: healthcare, construction, janitorial and even restaurant workers," Jessica Looman, head of the Labor Department's Wage and Hour division, told reporters.

Editor's note: This story was updated with a statement from Uber.

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