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Biden Administration Mulls Reclassifying Independent Gig Workers as Employees Nationally

By Rich Duprey - May 3, 2021 at 8:44AM

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It would be a redo of the California initiative that was overturned by voters.

Lyft (LYFT 3.86%) and Uber Technologies (UBER 5.53%) may end up having to classify their drivers as employees after all.

Months after California voters overturned a controversial state law requiring gig-economy companies to reclassify their independent contractors as employees -- which would have cost the companies hundreds of millions of dollars in pay and mandated benefits -- the Biden administration is now considering imposing similar rules nationwide.

Woman looking down street

Image source: Getty Images.

In an interview with Reuters last week, Biden's Labor secretary, Marty Walsh, indicated his agency would explore forcing companies across the country to reclassify their workers.

Although Lyft and Uber are the most visible symbols of the cost and disruption such regulations impose, the change would actually stretch over large swaths of the economy, changing the relationships between workers and hundreds of professions, trades, and industries.

Not only would rideshare companies be impacted, but also any business with freelance workers -- including food and grocery delivery drivers, publishers and newsrooms, trucking companies, and more -- would be affected by the change. 

While framing it as a worker protection issue, Walsh said requiring companies to treat independent contractors as employees is really a means of ensuring company profit "trickles down to the worker."

It's estimated 43% of the workforce is employed in the gig economy, meaning a national policy of worker reclassification would dramatically affect the economy as well as undermine the concept of at-will employment.

Walsh's comments are not policy proposals, but Lyft's stock tumbled 10% while Uber fell 6% as investors surmised that the Labor secretary would be putting the regulatory framework into motion.

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Stocks Mentioned

Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
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Lyft, Inc. Stock Quote
Lyft, Inc.
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$14.00 (3.86%) $0.52

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