Uber, Doordash, Lyft share tanks after Labor Department proposes change to worker classification

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Stock prices for Uber, Lyft and DoorDash, which rely heavily on gig workers to transport people and meals, fell on Tuesday after the Department of Labor issued a proposal that could pave the way for regulators and courts to classify gig workers as employees rather than independent contractors.

Since the announcement, Lyft shares fell 12% to $11.22 on Tuesday, while Uber fell 10.4% to $24.61 and DoorDash fell 6% to $44.98.

The proposed guidelines are intended to combat misclassification of employees, but could also increase costs for companies like Lyft, Uber, Instacart and DoorDash, which rely on contract workers to pick up shifts according to their own schedules.

It will also allow for a more comprehensive study of whether a worker is classified as a contractor or employee, including whether the work is essential to the employer’s company. According to the Labor Department, the aim is to protect workers from improper classification while providing consistency to companies that wish to employ independent contractors.

The scheme could also make it easier for contractors who are economically dependent on a company to achieve full employment status, but the scope of the proposal would be limited to areas such as minimum wage enforcement.

Meanwhile, companies argue that flexible working time models are attractive to workers, citing surveys showing the popularity of the model, which they say is made possible by using the status of independent contractor.

However, labor experts and activists argue that the contractor model is used by companies to reduce their own costs, while depriving workers of important protections such as health-care benefits, overtime pay, and the ability to unionize.

The sources for this piece include an article in CNBC

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