Executives from Lyft (NYSE: LYFT) and Uber (NYSE: UBER) were under the microscope this week during their Q1 analyst earnings calls, and while they struck diplomatic tones around the regulatory environment surrounding gig workers, other stakeholders did not hold back.
“The decision by the Department of Labor to rescind the final independent contractor rule is disappointing as it disregards the will of individual workers, who greatly value the flexibility inherent in independent work,” said the Coalition for Workforce Innovation (CWI) in a statement following the news on Wednesday. “This action was taken prematurely and likely is in violation to the Administrative Procedures Act. CWI will continue its litigation effort to hold the department accountable and will be amending its complaint to contest the department’s claimed authority to withdraw the rule, which compounds the department’s violation of APA requirements.”
CWI joined a lawsuit filed by the Associated Builders and Contractors of Southeast Texas and the Associated Builders and Contractors against the Department of Labor to prevent the Biden administration from delaying implementation of the Independent Contractor Status Under the Fair Labor Standards Act final rule. The suit claims the administration violated the Administrative Procedure Act, which sets forth protocols for creating and rescinding rules. Evan Armstrong, vice president of workforce for the Retail Industry Leaders Association (RILA) and a spokesperson for CWI, told Modern Shipper that in this case, the administration did not provide a justification for removing the rule and has offered no alternative.
On Wednesday, the Biden administration’s Department of Labor formally withdrew the regulation that many said would have made it easier for companies to classify workers as independent contractors. The withdrawal of the rule, which was set to go into effect on Friday, by DOT’s Wage and Hour Division leaves the status quo in place but has many supporters of gig work concerned the current administration will push to classify the workers as employees.
“The rescinded rule was a needed update to the complicated economic realities test for independent workers. The rule reflected a modern view of the workforce and economy. The path sought by this Administration is to move backwards on behalf of political stakeholders rather than pushing forward and listening to the actual workers who are impacted by this policy,” CWI said in its statement.
According to the Center for Economic Opportunity at Independent Women’s Forum, an estimated 57 million Americans work as freelancers, which includes the so-called gig workers often associated with rideshare and food delivery services.
“This is a stunning blow for our nation’s independent workers. Over 57 million people freelance, and the majority of independent contractors choose this work arrangement for the flexibility it provides. This is especially devastating for working mothers who depend on independent, flexible work to earn while still filling other roles,” said Patrice Onwuka, director of IWF. “By undoing the Trump administration’s needed efforts to protect independent contractors, President Biden is turning his back on hard-working independent workers in favor of union bosses. If he wants to combat the gender inequality brought on by the pandemic, he would embrace alternatives to the outdated 9-5 work model.”
In contrast to those pointed comments, on their respective earnings calls this week, executives from Lyft and Uber were more measured in their responses.
“Over the last several months, we’ve had productive conversations with policymakers at every level. We continue to believe the win on Prop 22 in California, passed by nearly 10 million voters across the political spectrum, has shifted the policy conversation toward protecting independents, while also providing important benefits drivers want,” John Zimmer, Lyft president, co-founder and vice chair, said in prepared remarks on the earnings call. “We remain ready to work with policymakers, labor leaders and all interested parties who want to move forward and build a stronger safety net for app-based workers. I look forward to sharing more progress on these efforts in the months to come.”
Zimmer’s comments were made on Tuesday, prior to the decision on Wednesday, although it was widely expected the administration would rescind the rule. In response to a question from Piper Sandler analyst Alex Potter, Zimmer said Lyft continues to engage with policymakers around the country on what drivers want, which he said was made clear in the overwhelming support for Prop 22 in California.
“They want independence, as well as benefits,” he said. “And so, I would expect more models like that to come forward over the coming quarters. The way we were successful with Prop 22 was working together and creating a coalition of the industry, and that’s how we’ll do it going forward. So overall, I’m optimistic we’ll have a few more success stories on bringing this model to more states this calendar year.”
Uber CEO Dara Khosrowshahi also noted research continues to suggest drivers want independence and not to be classified as employees.
“They do not want to be full-time employees,” he said on Uber’s Wednesday earnings call, which came shortly after the decision. “That the number one feature, as it relates to gig work is flexibility. And what we’re talking about is taking it to the next level, which is providing flexibility and protections.”
A CWI survey in January 2020 found that 69% of gig workers worked full time, 46% considered it a long-term opportunity and an additional 39% said it was a lifestyle choice. A full 91% said they would continue in their current independent work arrangement for the next six months. Additionally, 94% said they were very satisfied or somewhat satisfied with their work arrangements.
Tony West, senior vice president, chief legal officer and corporate secretary for Uber, said the decision to rescind the rule was not a surprise.
“I think that when we look at the makeup of the current administration, it’s fair to say that there are individuals who have varying views on these issues,” West said. “They’re not all identical in their outlook, and we think that creates space for some meaningful dialogue.”
West referred to the Labor Department saying it wants to “engage key companies” as providing an opening for Uber and others to help shape future regulation.
“We think there’s space here for a conversation,” West added. “We continue to … look for those opportunities to talk about opportunities for bolstering independent work with those kinds of benefits and protections.”
Marty Walsh, U.S. secretary of labor, told Reuters in an interview earlier this week that “in a lot of cases, gig workers should be classified as employees.”
“The Biden Administration clearly believes that more gig workers should be classified as employees,” Snigdha Mamillapalli, an associate in the litigation, labor and employment practices division at the law firm Pullman & Comley, said in an email to FreightWaves in reaction to the Walsh statement.
West brought up the experience in California with Prop 22 as a potential model for the country.
“You have in California, which is a very blue state, you have a model that was overwhelmingly approved by the voters,” West said. “And so not only are voters listening to drivers and to earners on these platforms that are choosing independent work, we see that choice being made over and over again.
“The reality is that these kinds of solutions are workable solutions and they’re real resolutions to this issue,” he added. “And so we’d like to be able to see in other states and in other jurisdictions solutions that draw upon some of the things we’ve seen in California, in the U.K. and in other places where we’re able to kind of bolster independent work with these types of benefits and protections.”