The Dept. of Labor Changes up the Employee vs. Contractor Debate for Gig Workers

Last year I wrote about Uber and Lyft’s battle against a California law that required them to treat their drivers as employees, rather than contractors. Then, in November, California voters passed Prop. 22, which exempted app-based drivers from that law, something Claire covered in detail. Two recent actions from the Biden Administration, which has positioned itself as pro-worker and pro-organized labor, indicate that the fight over how to classify gig workers is far from over, and that the administration will throw their weight toward increasing the rights of gig workers. These actions come as Uber, Lyft, and other emerging transportation companies reckon with their labor practices overall, amid a changing atmosphere as we emerge from COVID lockdown.

Administration Moves

Last week the Department of Labor withdrew a Trump-era proposed rule change governing the definition of “independent contractor.” The Trump Administration’s proposed change would have deemphasized a number of factors that are used in deciding a worker’s classification, which would have weighted considerations toward classifying workers as independent contractors. By pulling the rule before it can go into effect, the existing rule, with six factors for consideration, remains in use under the Fair Labor Standards Act. This move comes in the same week in which the Secretary of Labor, Marty Walsh, voiced his support for gig workers being considered as employees and receiving benefits, like health insurance, in “a lot of cases.” While that’s far from a definitive course of action, when combined with the regulatory changes, the Secretary’s words indicate the Federal government will be paying attention to the classification fight going forward and is putting its weight behind pro-worker options. I’ll also note that in March Uber announced it will categorize its UK drivers (which total more than 70,000) as employees, bringing them into compliance with a recent court decision – meaning Uber is facing labor changes on both sides of the Atlantic.

Uber and Lyft Need Drivers

While Uber and Lyft gird themselves for possible regulatory changes, they are also dealing with a shortage of drivers. In 2020 COVID lockdowns and the continued threat of the virus (along with the threat of monstrous customers…) cratered demand for rideshares, leading many drivers to move on from ridesharing. Now, with demand for rides growing as the world opens back up, both companies find themselves in need of more drivers and having to turn to financial incentives to recruit them. On the ground the shortage has raised prices and increased wait times for users.

At the same time as they have been recruiting more human drivers, both Uber and Lyft have purged their in-house development of automated vehicles. In December, Uber sold its automation efforts over to automated vehicle developer Aurora for roughly $4 billion. Then last month Lyft offloaded it’s automation program to a Toyota subsidiary for $550 million. For a long time the conventional wisdom was that the end-goal of the ridesharing companies was to automate their fleets and escape from having to deal with human employees (or contractors). Yet given that automation is still years away from widespread deployment and that only a few major corporations can afford the long term development costs of AVs, it seems Lyft and Uber are cutting their losses. That said, if they can survive COVID losses and changing demands, I’m sure they’ll be first in line to buy production AVs.

Emerging Tech and Emerging Labor Issues

Of course, Uber and Lyft are far from the only transportation-tech related companies with labor issues that have become apparent over the past year. Last year, as grocery deliveries exploded in popularity, Amazon drivers were coming up with unique ways of ensuring they got a crack at incoming orders – hanging their phones from trees as close to a Whole Foods as possible. The idea was that by leaving phones closer to the building they would be the first to be offered a delivery job via the gig-app Amazon Flex. Depending on your point of view this is either ingenious, or demonstrative of the gig economy pitting workers against each other. More recently Amazon has taken flack for making the delivery drivers who operate Amazon branded vans (yet are wait for it… contractors…) sign biometric consent forms. The forms give Amazon permission to use cameras and sensors to monitor drivers “100%” of the time they are working, in the name of safety, as the system can give audio alerts to drivers in real time. I can’t imagine that an AI-enabled camera that can yell corrections at you as you drive is anyone’s ideal boss, but here we are.

The gig economy is clearly not going away anytime soon, even if some gig jobs become automated. And now there is momentum for dealing with the employment issues around these companies and their platforms. Just where that momentum takes the labor market, and how it may change the relationship between platforms and workers, remains to be seen.