The Biden administration published a new proposal Tuesday regarding how workers should be classified, saying that thousands of people have been incorrectly labeled as contractors rather than employees, potentially curtailing access to benefits and protections they rightfully deserve.
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.
The reaction in markets for major gig companies was immediate. Shares of of the ride-hailing companies Lyft and Uber tumbled about 8%, although both companies dismissed the significance of the new proposal and its potential to affect their business.
Misclassifying workers as independent contractors denies those workers protections under federal labor standards, promotes wage theft, allows certain employers to gain an unfair advantage over businesses, and hurts the economy, the Labor Department.
“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 Labor Department argued that the Trump administration rule did not comport with the 1938 Fair Labor Standards Act and decades of case law...
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