The Biden administration on Wednesday blocked a Trump-era rule that would have made it easier to classify gig workers who work for companies like Uber and Lyft as independent contractors instead of employees, signaling a potential policy shift toward greater worker protections.
Shares of companies that employ gig labor such as Uber, Lyft and DoorDash immediately pared gains. At 10:58 a.m. ET (1458 GMT) Uber shares traded down 1.8%, Lyft was down 4.4% and DoorDash fell 2.8%.
An Uber spokesman acknowledged on Wednesday the current employment system is outdated.
“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.”
He said the company believes it can offer the best of both worlds.
A DoorDash spokeswoman said “dashers work fewer than four hours per week on average and they overwhelmingly tell us how important the flexibility to earn on their own schedule is to them.”
Gig workers are independent contractors who perform on-demand services, including as drivers, delivering groceries or providing childcare – and are one-third more likely to be Black or Latino, according to an Edison Research poll.
The rule by former President Donald Trump’s administration, finalized in early January before he left office on Jan. 20, would have hampered workers’ ability to earn a minimum wage and overtime compensation – protections offered under the Fair Labor Standards Act (FLSA).
It was supposed to take effect in March, but did not because it was being reviewed by the Labor Department under President Joe Biden, a Democrat who succeeded the Republican Trump. The withdrawal will be effective on Thursday.
The FLSA includes provisions that require covered employers to pay employees at least the federal minimum wage for every hour they work and overtime compensation at not less than 1-1/2 times their regular rate of pay for every hour they work over 40 in a workweek. FLSA protections do not apply to independent contractors.