The U.S. Department of Labor on Wednesday finalized a rule that could be an advantage for app-based concert companies, while it could cost U.S. workers billions of dollars in lost wages and benefits.
The rule sets a test for determining independent contractor status under the Federal Labor Standards Act, giving more importance to the two out of five factors that critics say are favorable to concert companies such as Uber Technologies Inc. UBER and Lyft Inc. LYFT: “the nature and degree of control of the worker over the work, as well as the opportunity of the worker to obtain profit or loss on the basis of initiative and / or investment. “The other factors are the ability, the permanence of the working relationship and whether the work is part of an integrated production unit.
“This rule brings the long-needed clarity for American workers and employers,” US Secretary of Labor Eugene Scalia said in a statement.
The rule was proposed in September, and the comment period was shortened to 30 days instead of 60 days, with critics saying the Trump administration’s effort to speed it up before the end of his term. It is expected to take effect on March 8, the Labor Department said in a press release.
The proposal has received 1,825 comments, including from the Institute for Economic Policy, which estimates the rule will cost workers – from delivery and transport workers to those working in call centers, agriculture, home health care and elsewhere. – at least $ 3.7 billion a year in payment and benefits.
“This loss to workers consists of at least $ 400 million in new annual paper costs and a transfer to employers of at least $ 3.3 billion in reduced compensation,” wrote Heidi Shierholz, senior economist at EPI and Policy Director. “Furthermore, social security funds would lose at least $ 750 million annually in the form of reduced employer contributions, which means that this rule also results in a transfer of at least $ 750 million annually from insurance funds. to employers ”.
Two dozen state attorneys general and officials in New York, Chicago, Pittsburgh and Philadelphia called on the Department of Labor to withdraw the rule, while business groups and chambers of commerce supported the rule change.
Opponents are optimistic that the new administration of President-elect Biden could stop the rule from coming into force and eventually repeal it. Biden expressed support for various criteria for determining the classification of workers, the so-called ABC test, which is the law in California, but not for concert companies, which have successfully supported a voting measure to exempt them from the law in California. November.
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“[The Biden administration] they will want their own rule, but they should open it up for public comment and, of course, it would take some time, ”said John Logan, a professor in the Department of Labor and Employment Studies in San Francisco.
Beneficiaries include Uber, Lyft and other concert companies, which have faced challenges across the country in treating drivers and delivery workers as contractors.
Nicole Moore, a Los Angeles organizer with Rideshare Drivers United, said: “Let’s be clear. Withdrawal of labor rights from application-based workers is the agenda of the Trump administration, which has never considered the interests of front-line workers. But this is not concrete, and the new administration has the power to introduce a better future for all workers. “
“We appreciate the efforts made to modernize our nation’s laws and look forward to working with policy makers to continue this vision,” Uber’s head of federal affairs, Danielle Burr, said in a statement.
The receiving Biden administration did not return a request for comment. Lyft did not return a comment request.