The U.S. Department of Labor on Wednesday finalized a rule that could benefit application-based concert companies, though it could cost U.S. workers billions of dollars in lost wages and profits.
The standard sets out a test to determine independent contractor status under the Federal Labor Standards Act, giving more weight to two of the five factors, which critics say are favorable to concert companies like Uber Technologies Inc. UBER and Lyft Inc. LYFT: “the nature and degree of control of the worker over the work and the opportunity of gains or losses of the worker depending on the initiative and / or investment.” The other factors are the ability, permanence of the employment relationship and whether the work is part of an integrated production unit.
“This rule provides clarity that has long been needed for American workers and employers,” U.S. Secretary of Labor Eugene Scalia said in a statement.
The rule was proposed in September and its comment period was shortened to 30 days instead of 60 days, in which critics said it was the Trump administration’s effort to push it before end his term. It is scheduled to take effect on March 8, the Labor Department said in a press release.
The proposal received 1,825 comments, including from the Institute for Economic Policy, which estimates that the standard will cost workers (from delivery and transportation workers to those working in call centers, agriculture, to home health care and other places) at least $ 3.7 billion a year. in salary and benefits.
“This loss for workers consists of at least $ 400 million in new annual processing costs and a transfer to employers of at least $ 3.3 billion in the form of reduced compensation,” wrote Heidi Shierholz, senior economist at EPI and policy director. “In addition, social security funds would lose at least $ 750 million annually in the form of reduced business contributions, which means this rule also entails a transfer of at least $ 750 million annually from social security funds to employers “.
Two dozen attorneys general and officials in New York City, 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 incoming administration of President-elect Biden could stop the rule from taking effect and eventually rescind it. Biden has expressed support for different criteria for determining the classification of workers, the so-called ABC test, which is a law in California, but not for concert companies, which successfully supported a voting measure to exempt those of the law in November.
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“[The Biden administration] they will want their own rule, but it would have to be opened to public comment, and of course that would take a while, ”said John Logan, a professor in the Department of Labor and Labor Studies at San Francisco State University.
Beneficiaries include Uber, Lyft and other concert companies, which have faced challenges across the country for treating drivers and delivery workers as contractors.
Nicole Moore, a Los Angeles-based organizer with Rideshare Drivers United, said: “Let’s be clear. Eliminating application-based workers ’labor rights is the Trump administration’s agenda that has never taken into account the interests of front-line workers. But this is not concrete and the new administration has the power to start a better future for all workers.
“We appreciate the efforts made to modernize our nation’s laws and look forward to working with policymakers to promote this vision,” Uber’s head of federal affairs, Danielle Burr, said in a statement.
The incoming Biden administration has not returned any comments. Lyft has not returned any requests for comments.