If you like Uber, can you keep your Uber?
Nothing has changed mass transit more than the app-based gig economy, which gives people the ability to hail a ride from a mobile phone. Companies such as Uber, Lyft, Instacart, DoorDash and Via Transit have used this technology to enable a network of independent drivers to provide rides and commercial deliveries across America and many other countries.
But on October 13, the US Department of Labor announced proposed rule it would change the definition of an independent contractor, potentially making drivers full-time employees of ride-sharing and delivery companies. This could put these companies out of business because they rely on part-time workers. Comments on the rule are due by November 28.
Ministry of Labour assessments that there are 22 million independent contractors. Other assessments are close to 60 million. The number is imprecise because people self-identify as independent contractors.
The app-based economy has benefited Americans by allowing them to monetize previously unused portions of their time, raising income levels and providing opportunities for flexible work. Students can work part-time when they are not studying. Moms can ride Lyfts while the kids are at school. School bus drivers can drive Ubers when their school shifts are over.
Ride sharing is popular. After the California Legislature passed AB5, a 2019 law that would require many independent contractors to be employed, Golden State residents overwhelmingly passed Proposition 22 in 2020, to maintain their current status as ride-sharing drivers if they meet certain criteria. Due to a challenge by the International Union of Civil Servants, the measure is still tied up in court.
Many application-based platforms rely on this network of independent contractors. The advantage for these workers is the flexibility in determining their own working hours and the ability to work for a variety of companies. The drawback, according to the Department of Labor, is that many are not covered by the minimum wage and overtime protections of the Fair Labor Standards Act of 1938 and do not receive standard benefits.
No one mentions that fees account for 31 percent of benefit costs, according to the most recent data Employment Cost Index the Ministry of Labor announced, and salaries and wages for the remaining 69 percent. If independent contractors were reclassified as employees, their cash pay would be reduced. Some may already be receiving benefits through another job or another employed family member, and prefer the extra dollars.
Democratic administrations favor fewer independent contractors and a standardized set of benefits. This gives more power to unions to organize workers. If Uber were the employer of all drivers, the union could ask Uber to support unionization. It is practically impossible to organize independent contractors. Public sector unions gave 90 percent of their contributions to Democratic candidates in the 2020 election cycle. according to OpenSecrets.com.
Given that the share of wage workers belonging to trade unions has dropped from 20 percent in 1983. to 10 percent In 2021, unions are under pressure to hire more members to fund union officials’ salaries and member pension plans.
This role of independent contractors in the economy has led to a game of political ping-pong between administrations. In 2015, Obama’s Department of Labor issued Administrator’s interpretation who concluded that most workers are employed. The Trump administration retracted the interpretation in 2017 and issued new rulewhich comes into effect in March 2021, which focused on whether workers have control over their work and their opportunities for profit or loss.
The Biden administration tried to overturn the Trump administration’s rule in March 2021, but the U.S. District Court for the Eastern District of Texas ruled that the Labor Department did not give the public enough opportunity to comment on the change, and upheld the Trump administration’s rule.
The new proposed rule of the Department of Labor is complex and mirrored an Obama-era rule. It proposes a six-part “economic reality test”, including the following factors:
(1) the worker’s opportunity for profit or loss; (2) the nature and extent of the worker’s investment in the job; (3) durability of the relationship; (4) the degree of control exercised or retained by the employer; (5) to what extent the work performed is an integral part of the employer’s business; and (6) whether the work performed requires special skill and initiative.
Some of these factors are unclear. It is possible to be in business for yourself and economically depend on your clients. Some drivers, landscaping companies, and lawyers are all independent contractors, operating for themselves but economically dependent on their clients.
For many independent contractors, identifying a single employer is not easy. Some people drive for multiple companies, and it’s common to see Lyft and Uber signs in the vehicle as well. Who would be considered an employer?
The new rule, if adopted as proposed, would add another layer of complexity to small businesses, independent movers and potential enforcement actions.
The IRS has a 20-factor test for independent contractors, and anti-discrimination laws have their own common law test. In addition, states have their own criteria for unemployment, workers’ compensation, wage and hour rules, and taxes. It is already difficult for small businesses and independent contractors, who have little knowledge of the law, to avoid trouble.
Americans don’t want to go back to the 17th centuryth18thand 19th centuries and most of the 20th centuryth century, when people had to rely on hailing a passing taxi or going to a taxi rank to find one. At the time, the platform economy, with Uber and DoorDash, was unimaginable.
A new rule proposed by the Department of Labor would pose a serious problem for people who use app-based ride-sharing services and the drivers who provide them. Who knows if your Uber will survive?
This piece originally appeared in Forbes https://www.forbes.com/sites/dianafurchtgott-roth/2022/10/14/if-you-like-your-uber-can-you-keep-your-uber/? sh =7f2b4a5c2fda