Finance

Shares of gig economy groups dive on comments by US labour official

More than $15bn was wiped off the value of America’s largest gig economy companies on Thursday morning after the US labour secretary suggested some workers ought to be classified as employees.

Shares of ride-sharing pioneers Uber and Lyft and the food delivery service DoorDash were down by between 5 and 11 per cent after Marty Walsh told Reuters he felt workers should be treated as employees in “a lot of cases”.

“In some cases [workers] are treated respectfully and in some cases they are not,” he told the news agency. “And I think it has to be consistent across the board.”

Investors took the comments, from the head of a department with considerable influence over the interpretation of US labour law, as a significant threat to companies whose business models rely on the controversial “independent contractor” status of workers. This allows key costs — such as fuel and maintenance — to be passed on to the worker, and typically come with fewer protections and benefits.

“These companies are making profits and revenue and I’m not [going to] begrudge anyone for that because that’s what we are about in America . . . but we also want to make sure that success trickles down to the worker,” Walsh said.

He was planning meetings with gig economy companies in the coming months to discuss the issue, Reuters reported.

“Uber believes that we should be advancing policies to improve independent work, not eliminating it altogether,” the ride-sharing group said after Walsh’s comments were reported.

“But more important than what we think is what drivers think. Survey after survey shows that the overwhelming majority of app-based workers want to stay independent, because it allows them to work when, where and how they want with a flexibility no traditional job can match.”

Elizabeth Jarvis-Shean, DoorDash’s policy chief, said its drivers — which it calls Dashers — worked on average just four hours a week, and she called for a discussion on “modern policies” around work.

“Dashers have overwhelmingly told us that they value the flexibility to earn when and how they choose,” she said.

Lyft did not return a request for comment.

The Labor Department’s Wage and Hour Division is responsible for enforcing national criteria on whether workers are employees or independent contractors. The Trump administration sought to apply a looser interpretation of the criteria, but Walsh’s Labor Department has proposed rescinding the changes and is awaiting White House approval.

Gig companies have aggressively fought more localised efforts to bring about reclassification, most notably in California. The companies have warned that switching models to classify workers as employees would mean increased prices for customers and fewer and less flexible jobs for drivers. Workers would need to adhere to shift patterns rather than the current ad hoc logging-on for jobs, they argue.

Uber, both in the US and abroad, has lobbied for what it terms a “third way” of employment that rests between formal employee status and the less stable independent contractor arrangement. In the UK, the country’s highest court forced Uber to reclassify its ride-share drivers as “workers” — a UK-specific designation that offers some benefits, such as holiday pay and pension.

The US Bureau of Labor Statistics estimated in 2017 there were more than 55m gig workers in the US, a number that is expected to have risen considerably since.

During the pandemic, when demand for some gig worker services plummeted, many workers turned to specially crafted emergency programmes from the government to make ends meet.

“If the federal government didn’t cover the gig economy workers,” Walsh added, “those workers would not only have lost their job, but they wouldn’t have had any unemployment benefits to keep their family moving forward . . . [and] we’d have a lot more difficult situation all across the country.”

Walsh’s comments are the latest signal that the Biden administration intends to prioritise the issue of workers’ rights. During an address to Congress on Wednesday, President Joe Biden reiterated his support for the union movement, saying: “The middle class built this country. And unions build the middle class.”

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