Biden’s New Gig Worker Rule Could Squeeze Small Businesses, Setting Up a Legal Fight

The Biden administration announced a new rule that would reclassify millions of gig workers across the country as employees, a move that could squeeze small businesses.

The Labor Department’s proposal, released on Oct. 11, will make it more difficult for companies to label workers independent contractors, with consequences for ride and delivery services, along with other industries that rely on employees in that work category.

Share prices of the largest U.S. gig companies, such as Lyft, Uber, and Doordash, tumbled after the announcement of the proposed change.

Millions of Americans are currently working at gig jobs, a category that has become essential to many companies in the transportation, restaurant, construction, health care, and services sectors.

About 60 million people performed some gig work over the past 12 months, a December 2021 survey by Upwork revealed, according to Reuters.

Household incomes and job flexibility for many gig workers would be affected by the changes.

The reclassification of gig workers has been tried in states like California, with the consequence of hurting the livelihoods of many part-time workers and businesses.

Executives at Uber and Lyft have been critical of these changes in the past, and warned that having to classify their drivers as employees would hurt their business models to the detriment of riders.

Uber said that the company’s drivers prefer the flexibility of their current terms and that the proposed rule is “essentially returning us to the Obama era, during which our industry grew exponentially,” said C.R. Wooters, Uber’s head of federal affairs, in a statement to the Financial Times.

Lyft responded by dismissing the changes as posing “no immediate or direct impact” to its business, since drivers already worked as contractors under a similar rule from the Obama administration.

Ride-sharing companies currently save up to 20–30 percent on labor costs by employing their drivers as independent

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