Gig economy worker misclassification a ‘pervasive issue,’ Department of Labor says

Lyft, Uber suffer stock drops on administration's support of worker protections

The U.S. Department of Labor, led by Secretary Marty Walsh, supports strengthening worker protections – and potentially also efforts to classify gig economy workers as full-time employees.

A spokesperson for the Department of Labor confirmed that Walsh said he believed many gig workers should be considered employees in a statement to FOX Business on Thursday, following a report from Reuters.

"The Secretary was reiterating that misclassification is a pervasive issue that impacts both the economy and workers," the spokesperson explained. "Worker protections under federal law create a safety net of security and benefits that provide ladders of opportunity into the middle class. This safety net should be further strengthened. As our recovery continues, we should be supporting the employer-employee relationship and all of the opportunities that it provides."

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The aim of the policy is to prevent workers from being wrongly classified as independent contractors and thereby deprived of basic labor protections and benefits as a result.

Reuters first reported on Thursday that Walsh supported classifying gig workers as employees.

"We are looking at it but in a lot of cases gig workers should be classified as employees... in some cases, they are treated respectfully and in some cases they are not and I think it has to be consistent across the board," Walsh told the publication, as confirmed by the Department of Labor spokesperson. "These companies are making profits and revenue and I’m not (going to) begrudge anyone for that because that’s what we are about in America... but we also want to make sure that success trickles down to the worker."

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The Reuters report sent shares of Uber and Lyft tumbling during the trading session – just two of the many companies that rely on independent workers to carry out on-demand services.

Ticker Security Last Change Change %
UBER UBER TECHNOLOGIES, INC. 46.61 -4.61 -9.00%
LYFT LYFT INC. 49.80 -2.83 -5.38%

In addition to ridesharing companies, the trucking industry has opposed the policy – saying it would put owner-operators out of work.

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In January 2020 California implemented a law, known as AB5, which made it more difficult for companies to classify workers as independent contractors. However, voters approved a proposition in November that allowed some companies – like ridesharing companies – to continue classifying workers and independent contractors.

It is not clear that federal legislation on the issue would be able to pass in the Senate, where Republicans hold 50 seats.