Labor Dept. Says Workers at a Gig Company Are Contractors

from NYTs

The Labor Department weighed in Monday on a question whose answer could be worth billions of dollars to gig-economy companies, deciding that one company’s workers were contractors, not employees.

As a result, the unidentified company — whose workers, it appears, clean residences — will not have to offer the federal minimum wage or overtime, or pay a share of Social Security taxes. And while the decision officially applies only to that company, legal experts said it was likely to affect a much larger portion of the industry.

The move signals the Trump administration’s approach to the way gig companies, a growing share of the economy, must treat their work force. As companies like Uber and Lyft begin to sell shares to the public, industry officials estimate that requiring them to classify their workers as employees would raise their labor costs by 20 to 30 percent.

“Today, the U.S. Department of Labor offers further insight into the nexus of current labor law and innovations in the job market,” Keith Sonderling, an official in the division that oversees such issues, said in a statement. It is a longstanding policy for the department not to disclose the names of companies receiving such letters.

Under the Obama administration, the Labor Department issued guidance suggesting that gig workers like drivers for Uber and Lyft were likely to be employees, a stand the department rescinded several months after President Trump took office.

“There are few more contentious issues currently than the status of workers operating on platform-type business models,” said David Weil, the administrator who issued the guidance under President Barack Obama and is now dean of the Heller School at Brandeis University.

Unlike the broad guidance the Obama administration issued, the action announced Monday took the form of an “opinion letter” applying only to the company that sought it. But other businesses in the industry tend to parse such letters closely for insight into the department’s approach.

And the letters have more practical legal force than departmental guidance for the company in question. They are often referred to as “get-out-of-jail free cards” because they mean that the Labor Department won’t initiate enforcement proceedings against a company with a favorable letter.

The letter can also provide a powerful defense to the company if workers sue it or initiate arbitration proceedings to resolve allegations of improper classification.

More here.

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One Response to Labor Dept. Says Workers at a Gig Company Are Contractors

  1. Edward Holzel May 3, 2019 at 8:27 pm #

    The reclassification of labor laws for companies, such as Lyft and Uber, will be game-changing. Taxi companies, for example, are suffering greatly because of the rise of Uber and Lyft. Taxi companies have much higher costs because they employ employee’s and comply with regulation. This causes their prices to be much higher. Uber and Lyft operate with minimum costs. Their works just join the app and use their own cars and are not insured. That is a load of the company because the company does not have to worry about insurance. It also brings forward a double standard issue for taxi companies. Taxi companies need to be registered and follow procedures and laws in their field. Uber and Lyft comply with no regulation and their drivers are not held to any standards, except their grade based on consumers. Uber also has no real headquarters around the country. Since, they have no cars, because all the cars are owned by the workers, Uber does not have to worry about housing the cars or locations of storage around the country. Taxi companies, on the other hand, need to worry about storage because they have to follow regulations set by cities and states. Overall, the new regulation on companies, such as Lyft and Uber, will level the playing field for the driving people around the industry.
    Another company that could be affected is Airbnb. Airbnb operates by letting people rent out their homes on a user-friendly website. Airbnb has its employee’s provide the homes and housework needed to upkeep the home. Hotels are suffering from Airbnb because it is was better to get home rather than a hotel room on vacation or traveling. The costs are similar because people can find Airbnb homes that are cheaper than a hotel room. Overall, the regulations will hopefully affect many areas of work and provide an equalizing force in those areas of work, such as transportation and housing.

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