Joe Biden’s administration has proposed reversing a Trump administration rule that made it easier to classify workers as independent contractors. With this new measure, these temporary workers would become employees. Apps such as Uber and Lyft, which would be affected by this decision, have begun to suffer a drop in their shares. Last Tuesday, the central strategy implemented to combat the informal economy and strengthen the unitary economy was presented.
Many companies have been fighting labor costs, in terms of social services, understanding that this is possible with independent workers. In this way, there is no expense in terms of minimum wages, overtime, insurance and different social benefits that are a high cost for companies. This decision is intended to ensure that the financial results are favorable in the search for investors. The applications, such as Uber and Lyft, work with this independent employee modality without a contract, which allows them to save costs and processing times.
Biden and labor changes
The U.S. Department of Labor will need to address a number of factors with the Biden administration‘s new rule. In this regard, companies focus on “whether each factor shows that the worker is economically dependent on the employer for work rather than being in business for himself” to determine employment status under the law..
Marty Walsh, Secretary of Labor, noted that:
“While independent contractors play an important role in our economy, we have seen in many cases employers misclassifying their employees as independent contractors, particularly among our nation’s most vulnerable workers.”
App-based transportation companies seem to be the first to suffer the first “blows” after the new rule became known.
During the communiqué presented by Walsh, upon learning of this new proposal, it was expressed that:
“Misclassification deprives workers of their federal labor protections, including their right to be paid their full legally earned wages. The Department of Labor remains committed to addressing the problem of misclassification.”
With this change being proposed by the Biden administration, applications that have proliferated in the informal economy would be affected. Some of them had succeeded in opposing basic labor laws that are mandatory in other industries. Companies such as Lyft, Postmates, DoorDash, Instacar and Uber had invested more than $204 million in the push for the elimination of legislation reclassifying app workers as employees. This effort, achieved in California, became known as Proposition 22.
The term ‘independent contractor’ refers to workers whose economic reality does not depend directly on the employer. The Department of Labor’s proposal to reverse the Trump administration’s rule is aimed at not making it easier for companies, particularly in the app and transportation industries, to define their employees as independent contractors.