The U.S. Department of Labor said Tuesday it will file new rules outlining which workers are employees and which are independent contractors, sending shares of Lyft and Uber falling. File Photo by John Angelillo/UPI | License Photo
Oct. 11 (UPI) -- The U.S. Department of Labor will introduce guidance on which workers are employees and which are independent contractors under the Fair Labor Standards Act.
In a news release, the Department of Labor said it would introduce the proposed rule on Oct. 13, stating that the misclassification of workers "is a serious issue that denies workers' rights and protections under federal labor standards, promotes wage theft, allows certain employers to gain an unfair advantage over law-abiding businesses, and hurts the economy at large."
"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," Secretary of Labor Marty Walsh said.
The rule change is also aimed at undoing a Trump-era rule that considered five factors to determine if the worker's relationship to the business classified them as a worker or an independent contractor.
Under the Trump-era rule, the worker's level of control over their work and their ability to profit from their position with personal investment were given more weight than other factors. The proposed rule change under Biden's Department of Labor would also consider investments by the employee and employer, the skill displayed by the employee, the permanence of the working relationship and the degree to which the worker performs a function that is integral to the business.
Shares of Uber and Lyft, which both classify their drivers as independent contractors, fell as the new proposal was announced. During a call with reporters, Seema Nanda, the top lawyer at the Department of Labor, insisted the rule is "not intended to target any particular industry or business model."
Lyft in a statement said that there "is no immediate or direct impact on the Lyft business at this time" as the proposal has not exited the 45-day public comment period, also noting that it "does not reclassify Lyft drivers as employees" or force the company to change its business model.