Labor Department Blocks Gig Economy Rule
Gig Companies Lose a Layer of Protection
The US Labor Department blocked a Trump Era rule which makes it easier for gig companies like Uber (UBER) and Lyft (LYFT) to qualify workers as independent contractors.
The Labor Department said the rule, which was completed in early 2021, is being nullified before it goes into effect tomorrow. If the rule went into effect it would make it harder for gig workers to reclassify themselves under federal law as employees and get access to paid sick leave, health insurance, and a minimum wage.
Status Quo Remains
The Labor Department said withdrawing the rule will “stop the erosion of worker protections,” but it does not plan to offer any new protections for gig workers. Instead, the Labor Department will continue to enforce the Fair Labor Standards Act, which was put on the books in 1938. The department will also identify opportunities to enforce labor laws, particularly ones which apply to low-wage workers.
The decision to block the employment rule was criticized by some gig economy companies which called the current system outdated. They said workers should not be forced to choose between extra benefits or flexibility. Uber said it can deliver the best of both worlds by increasing benefits offered to independent contractors.
Flexibility Plus Some Benefits
The Biden Administration recognizes the importance of gig workers to the US economy but said if the Trump rule had been passed it would have been too easy for companies to deny workers benefits. The Labor Department said it has seen an increase in companies misclassifying workers to reduce labor costs.
Conflicts surrounding how gig workers should be classified have been heating up ever since California implemented a rule that would have required gig companies to reclassify workers as employees. Uber, Lyft, and others were exempted from that law in November. In return the companies agreed to provide health benefits to some workers and occupation accident insurance coverage. Many companies are hoping that this model of flexibility and some benefits will become a national standard.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.