The United States Department of Labor finalized a rule on Wednesday that could be a boon for application-based show companies, while potentially costing American workers billions of dollars in lost wages and benefits.
The rule establishes a test to determine independent contractor status under the Federal Labor Standards Act, giving more weight to two of the five factors, which critics say are favorable to show companies like Uber Technologies Inc. UBER and Lyft Inc. LYFT: “the nature and degree of control of the worker over the work and the opportunity for profit or loss of the worker based on the initiative and / or investment. ”The other factors are skill, permanence of the work relationship and whether the work is part of an integrated production unit.
“This rule provides the necessary clarity for American workers and employers,” said US Labor Secretary Eugene Scalia in a statement.
The rule was proposed in September and its comment period was shortened to 30 days instead of 60 days, in what critics said was the Trump administration’s effort to hurry it up before the end of its term. It is expected to go into effect on March 8, the Labor Department said in a press release.
The proposal received 1,825 comments, including from the Economic Policy Institute, which estimates that the rule will cost workers – from delivery and transportation workers to those who work in call centers, agriculture, home health care and elsewhere – at least US $ 3.7 billion per year in wages and benefits.
“This loss to workers is made up of at least $ 400 million in new annual paperwork costs and a transfer to employers of at least $ 3.3 billion in the form of reduced compensation,” wrote Heidi Shierholz, senior economist and director of EPI policies. “In addition, social insurance funds would lose at least $ 750 million annually in the form of reduced employer contributions, which means that this rule also results in a transfer of at least $ 750 million annually from social insurance funds to employers. ”
Two dozen state attorney generals and New York City, Chicago, Pittsburgh and Philadelphia officials asked the Department of Labor to repeal the rule, while business groups and chambers of commerce supported the move.
Opponents are optimistic that President-elect Biden’s next administration could prevent the rule from being enforced and eventually terminate it. Biden expressed support for different criteria for determining the classification of workers, the so-called ABC test, which is law in California, but not for concert companies, which successfully supported an electoral measure to exempt them from the law in November.
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“[The Biden administration] they will want their own rule, but they would need to open it up for public comment and, of course, it would take some time, ”said John Logan, professor in the Department of Labor and Employment Studies at San Francisco State University.
Among those who would benefit are Uber, Lyft and other show companies, which have faced challenges across the country in treating drivers and delivery workers as contractors.
Nicole Moore, a Los Angeles-based organizer for Rideshare Drivers United, said: “Let’s be clear. Taking labor rights out of application-based workers is the agenda of the Trump administration that never had the interests of frontline workers in mind. But this is not concrete and the new administration has the power to inaugurate a better future for all workers ”.
“We appreciate the efforts made to modernize our country’s laws and look forward to working with lawmakers to promote this vision,” said Uber’s federal affairs chief, Danielle Burr, in a statement.
The new Biden administration did not return a request for comment. Lyft did not return a request for comment.