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Stocks in the gig-economy companies like DoorDash, Uber, and Lyft reportedly plummeted recently after Labor Secretary Marty Walsh said many workers in the sector were mistakenly classified as independent contractors. Walsh told Reuters “[they were] looking at it,” which made the publication frame his comments as a sign that the Biden administration might take a more proactive approach toward regulating these companies — something that California failed to do by passing Prop. 22.
After Walsh’s comments, Uber shares reportedly closed down 6%, while Lyft shed nearly 10%. DoorDash closed down 7.6%. In its most recent quarter, Uber reportedly lost $968 million on a GAAP basis. Lyft reported a net GAAP loss of $458 million for its last quarter, and DoorDash reported a net GAAP loss of $312 million for its fourth quarter of 2020.
Walsh also told Reuters the department will be reaching out to companies that employ gig workers to make sure the workers have access to consistent wages, sick time, and health care. “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,” he reportedly added, “but we also want to make sure that success trickles down to the worker.”
Walsh is a former union leader, and “is expected to bring more teeth to U.S. labor laws under President Joe Biden’s administration,” as Market Watch wrote. Biden himself said during his presidential campaign that he would “put a stop to employers intentionally misclassifying their employees as independent contractors.”
The decade-long controversy over the treatment of the independent contractors who make up much of the workforce behind the on-demand economy, and whose poor treatment continues to provoke protests, is not new. As Prop. 22 intended to do, classifying workers as employees would require start-ups to provide benefits like minimum wage, health insurance, and unemployment insurance. But as we saw in California, after the state passed AB5 which required the gig economy to make the switch, they stalled by bringing up lawsuit after lawsuit and eventually poured $200 million into the ballot initiative Prop. 22 to overturn the law. And they won.
Tom White, analyst for D.A. Davidson, reportedly called Walsh’s comments “another sign that the gig companies are more likely to see upward pressure/risk related to driver-related costs.” Cherri Murphy, an organizer with Bay Area-based Gig Workers Rising, said that “It’s refreshing to have a Department of Labor that does not turn a blind eye to the plight of gig workers. Misclassification of gig workers is rampant and the pandemic has exacerbated inequality for app-based workers.” She called employee classification an “important first step to critical reform we need.”
However, in a statement to the Washington Post, as reported by Slate, the Labor Department urged observers not to take Walsh’s comments as a policy shift: “The Secretary was reiterating that misclassification is a pervasive issue that impacts both the economy and workers.”