US Dept of Labour proposes new rules for employee benefits and opportunities; market reacts

The US Department of Labour has recently introduced a proposal that will require the companies to entitle the workers to be considered employees and to have more and better benefits and legal protections than their contractors. The reaction to the proposal was almost immediate as share prices for Uber and Lyft dropped following the announcement.

The department further added that it will consider all points from the labourers' side from opportunities andlosses and profits to investments to the degree of control.

Labour Secretary Marty Walsh in a statement said, "Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages," Reuters added.

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On the other hand, the reaction in the markets for major gig companies was immediate as share prices for ride-hailing companies like Lyft and Uber plummeting by 12% and 10% respectively. However, both companies have reportedlydismissed the significance of the proposed rule and its potential effect on their business..

This includes CR Wooters, head of federal affairs at Uber, saying “Today's proposed rule takes a measured approach, essentially returning us to the Obama era, during which our industry grew exponentially,” in a statement.

On the other hand, in a blog post its rival ride-hailing company, Lyft said, “Importantly this rule: Does not reclassify Lyft drivers as employees. Does not force Lyft to change our business model.”

This proposed law comes ahead of the upcoming elections, a major politicalbattle in the United States. The pitched rule aims to overturn the present rule of the Trump administration that states that workers who own their own businesses or who can run onebe considered a contractor.

The proposal has not only given a chance to Republicans to criticise Democrats but has also turned companies against it. This rule was under the guidance of former president Obama butwas later withdrawn by Trump.

Additionally, a report by Associated Press also claims thatin the past gig economy giants have dodged attempts made by the US government to require their drivers to be classified as employees. They have long argued that their workers want to set their own hours as contract workers and require that flexibility.

The rule was welcomed by worker advocacy groups, while employer groups criticised it.According to Wedbush analyst Dan Ives in his research stated that this rule will change the current business model upside down and will cause major changes in the country, Reuters reported.

The new rule will come into effect next year and after a 45-day period following the public announcement during which stakeholders can raise their concerns and comments regarding the proposed law which will end on November 28, said reports. According to the labour department, this new law can change the circumstances for millions of custodians, truck drivers, waiters, construction workers and so on.

(With inputs from agencies)

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