The Biden administration is blocking a Trump-era rule that would have allowed companies to classify their staff as gig workers and independent contractors, wielding a blow to the ride-sharing and food delivery services who depend on freelancers for most of their labor.
That Trump proposal would have made it harder for workers at app-based companies such as Uber, Lyft or DoorDash to be counted as an employee under federal law, which meant they would not be covered by minimum wage and overtime laws.
With the May 5 ruling from the U.S. Department of Labor, those staffs could more easily unionize. And, they have more legal standing to file worker misclassification lawsuits, which could result in wage back-pay if the courts ruled that they were improperly classified.
U.S. Labor Secretary Marty Walsh said on May 5 that by revoking the Trump-era rule, “we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect.”
“Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors,” he said
The Economic Policy Institute, in a 2015 report, wrote that worker misclassification has meant a “loss of billions of dollars in tax revenue” for state, local and federal governments.
And they noted that not just app-based industries take part in the practice, which they say extends to construction, housecleaning and trucking.
“New ‘sharing economy’ businesses create cause for concern about possible misclassification because it is unclear how ‘autonomous’ these workers really are,” meaning the person is in reality only able to do work for one company,” the EPI added.
But Uber, in a written statement, called the existing employment system “outdated” and said it “forces a binary choice upon workers: to either be an employee with more benefits but less flexibility, or an independent contractor with more flexibility but limited protections.”
A similar effort had been tried in the state Legislature in 2019, but many state business groups lobbied hard against the measure, ultimately blocking it from reaching Gov. Phil Murphy’s desk.
Proponents of that particular measure, like Senate President Stephen Sweeney, D-3rd District, argued that regular employees are often improperly classified by business owners as independent contractors so employers can avoid employment taxes and other worker protections.
Many freelancers objected to the bill, worried that it would force them out of their positions and into inflexible and potentially lower-paying jobs.
In response to the measure and similar efforts in California, several app-based companies this February started the “New Jersey Coalition for Independent Work,” a lobbying group “committed to protecting the independence and flexibility of app-based workers while also working to find solutions to improve their access to benefits and other workforce protections.”