The Biden administration released a proposal Tuesday that would make it more difficult for companies such as Uber to treat workers as independent contractors.
The proposal was the latest rule floated by the administration and has big implications for the gig economy, which has gained in recent years as more people hail rides and have meals delivered over apps.
The new Department of Labor plan further undoes rulemaking from the Trump administration. Right before President Joe Biden was sworn into office, a rule making it easier for companies to classify workers as independent contractors was finalized under the Fair Labor Standards Act.
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The Biden administration later rolled back that rule, a process that has now culminated in this new proposal.
“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors,” Labor Secretary Marty Walsh said in a statement. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”
The proposal has the potential to increase labor costs. Some in the gig economy have estimated that their labor costs could tick up by as much as 30%.
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Stocks of both Uber and Lyft plummeted upon the proposal’s release on Tuesday morning. Uber’s stock was down a weighty 14.6%, and Lyft immediately shed more than 13% of its total value after the news broke.
Other companies reliant on the gig economy also faltered. DoorDash was down nearly 10%, Upwork was down about 4%, and Etsy was off by more than 6%.
