U.S. President Joe Biden's administration will issue a final rule this week that would make it more difficult for companies to treat workers as independent contractors than as employees, who typically cost a company more, an administration official said.
A U.S. Department of Labor rule, first proposed in 2022 and likely facing legal challenges, would require workers to be considered employees who receive more benefits and legal protections than contractors when they are „economically dependent” on a company.
Many industries could be affected by the rule, which takes effect later this year, but its potential impact on app-based services that rely heavily on contract workers has drawn the most attention. On Monday, DoorDash shares rose 3.9%, Lyft rose 3.6% and Uber rose 2.2%.
According to Mark Friedman, vice president of the US Chamber of Commerce, America's largest business lobby, the provision is among the most impactful regulations issued by the Labor Department's office that enforces US wage laws. But he said the draft version of the rule gives companies little guidance on how to draw the line between employees and contractors.
The left-leaning Economic Policy Institute said in a report last year that a truck driver considered a contractor earns up to $18,000 less a year, while construction workers' earnings drop by nearly $17,000. You could lose up to $9,500 in wages and benefits.
About 40% of American workers, or more than 64 million people, have done some freelance work in the past 12 months, according to Upwork.
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