Labor department proposes new rule on gig worker classification

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Gig workers get a break from Biden Labor Department

, author of Illustration: Brendan Lynch/Axios Score one for the . They've won the latest round in the yearslong back-and-forth over whether or not they count as employees under federal labor law and are entitled to earn federal minimum wage and overtime. Driving the news: The Labor Department on Tuesday announced a new rule that makes it more likely that gig workers get classified as employees — the latest pro-labor turn from the Biden administration. Background: App companies like Uber and Lyft generally classify their drivers as "independent contractors," arguing that workers have and control over when and where they work. A previous rule from the Trump Labor Department lined up with this reasoning.The Trump era Labor board also that workers buy their own cars — capital investments in their work — as evidence of their entrepreneurial standing. State of play: In its new proposal, the Biden Labor Department says those Trump era guidelines were too narrow.The Trump rule didn't take into account other ways companies can control workers in the workplace — for example, by specifying what they can charge customers or by closely monitoring their work.The proposal even appears to directly address ride-sharing specifically by saying "the use of a personal vehicle that the worker already owns to perform work — or that the worker leases as required by the employer to perform work—is generally not an investment that is capital or entrepreneurial in nature." The impact: "We're hoping this will change lots of business practices," Laura Padin, director of work structures at the National Employment Law Project, tells Axios."There's a lot in there that would justify finding app-based workers to be employees," she said, adding it would give the Labor Department strong footing to bring an action against these companies.Yes, but: It's hardly an open-and-shut case. The rule still has to go through a comment period before it's finalized — and could be challenged in court. Meanwhile: Uber and Lyft sought to downplay the significance of the proposal, saying it would essentially restore the rule in effect during the Obama administration, which did not result in a reclassification of its drivers, as Axios' Nathan Bomey reported. Still, their stock prices fell on the news — Lyft was down 12% on Tuesday while Uber shed 10%. Catch up quick: The fight over this issue has raged for a while, particularly in California, which initially passed a law called AB5 that would have classified many gig workers as employees. But companies spent lobbying to reverse that law via a voter referendum called Proposition 22. It sort of worked. The referendum passed, but got overturned in court and is now up in the air. Zoom out: Some employers have tried arguing their workers aren't really employees ever since the federal labor law first passed in the 1940s, as Josh Eidelson noted in last year. When companies like Uber and Instacart came on the scene, with their legions of workers, they reinvigorated the conversation and sparked lawsuits from state attorneys general over misclassification.Individual employees had a more difficult time litigating the issue, since their contracts include forced arbitration — meaning they signed away the right to take employers to court, says Padin.

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