The US Labor Department could grant millions of contractors employee status — and reshape the entire gig economy

The gig is up… Yesterday the Labor Department announced a proposal that could classify millions of gig workers (think: delivery drivers, janitors, and home-care aides) as employees rather than independent contractors. Over a third of US workers have performed freelance labor in the past year — and low-income Americans disproportionately rely on gig work. The rule would guide judges and companies, and will be formally published on Thursday, kicking off a 45-day public-comment period (with the final rule expected next year). Why it’s big:

• For workers: Being misclassified as a contractor means fewer labor protections and potential wage theft. But some business lobbying groups argue that a broad rule would hurt workers who want to have flexible hours and stay independent.
• For employers: Reclassifying workers as employees would mean higher spending, since hiring contractors can cut labor costs by up to 30%. But the majority of gig workers say they’d prefer not to be gig workers.

Eyes on the road… App drivers are synonymous with the gig economy, and Uber, Lyft, and DoorDash shares sank after the news. Refresher: in 2019 California legislators passed AB5, a landmark bill that reclassified many of the state’s app-based gig workers as employees. App giants have spent over $200M lobbying for their drivers to be exempt under Prop 22, which passed but was later declared unconstitutional.