Gig economy companies will now be able to classify their employees as independent contractors in a rule that was finalized by the US Department of Labor (DOL).
The Trump administration presented the final version of the rule on January 6th but will effect as of March 8th. However, with President-elect Joe Biden taking office this month, the rule may be changed.
A New Framework
Last year, the Department of Labor devised a new framework to classify contractors and employees. The framework distinguishes the two using two core factors; nature and degree of control over the work as well as an opportunity for profit or loss. Additional guideposts in the framework focus on the amount of skill required and the degree of permanence of the work. It also looks at the nature of the work and if it is part of an integrated unit of production.
Existing Regulations
While the rule may be new, it is an interpretation of the already existing regulations instead of establishing new ones and covers federal laws only as enforced by the DOL.
That said, states can still come up with their own definitions. California’s Prop 22 for instance, stipulates that Lyft and Uber drivers are not employees. The framework can further influence how companies categorize their employees.
In December, both Uber and Lyft rolled out benefits for their drivers in California under Prop 22. The new benefits include guaranteed minimum earnings as well as healthcare stipends. During the roll-out, Uber CEO claimed that it was just the beginning of improving the gig economy.
Gig economy companies such as DoorDash, Lyft, and Uber splashed a whopping $200 million on the “Yes on 22” campaign on billboards, print, digital, radio ads, and deployment of dozens of lobbyists. Prop 22 would help these companies avert the AB5 state law that requires them to treat workers as employees.
The National Employment Law Project
According to the National Employment Law Project, the new framework is not a meaningful clarification but a mere “narrowing of the standards.”
Not Fair
While this new rule may be a success to the gig economy companies, gig workers feel cheated as the rule will strip them from their labor rights. In California, Prop 22 may not be the end of the battle as gig workers, activists, lawyers, the National Employment Law Project as well as the Partnership for Working Families have vowed to fight it out in 2021.