How millions of gig workers could be affected by a new labor rule

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At the time Dominique Smith After downloading a new app to his phone in November 2021, he’d been a rideshare driver long enough to know that figuring out how much money he was making wasn’t easy.

He’d ridden for Lyft and Uber for nearly five years, during which time a significant chunk of the money he “earned” never ended up in his wallet — from the $300 a week he shelled out for a rental car, to just about anything to constantly fill up his petrol tank. Although he worked long shifts six to seven days a week, “there was no saving, just trying to get the basics down,” he said. Even the basics were a challenge. He regularly stopped to buy donated groceries at churches and food banks, and he bought discounted items at the Grocery Outlet. “It was a struggle to keep a roof over my dog’s head,” said the 34-year-old San Jose resident.


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The new app was called Driver’s Seat Cooperative. Smith was among 55 members of Rideshare Workers United in California who participated in a study that tracked more than 12,000 rides over a six-week period to analyze working conditions and income. The main finding of the study, published last month by the National Equity Atlas, a project by PolicyLink and the USC Equity Research Institute (ERI), surprised even a seasoned driver like Smith: On average, after the myriad expenses of carpooling, they were making just $6.20 an hour. Had they been regular employees instead of gig workers, the study found, they would have made almost $11 more an hour — or $16.70 an hour.

“You have the illusion that you’re making so much money, but you don’t factor in so many costs,” Smith said. “They’re offloading huge costs, so it’s their duty to keep us as a contractor.”

A Lyft spokesman called the report a “flawed survey unrelated to the experiences of drivers in California” and argued that “if there was any truth to these results, drivers would not choose to continue doing this work.” Uber did not respond to a request for comment.

Traditional workers typically enjoy a variety of benefits and rights—including expense reimbursements, unemployment and workers’ compensation insurance, paid sick leave, family leave, and overtime—that independent contractors do not enjoy. In California, elected officials passed Assembly Bill 5 in 2019, which converted many gig workers, including rideshare drivers, into regular employees. A year later, however, Uber, Lyft, and other app-based delivery companies spent more than 200 million dollars Passing Proposal 22 — making it the costliest ballot measure in the state’s history — which exempted them from the legislature. (Last August, the Alameda Superior Court of California ruled Prop. 22 unconstitutional; The ruling has been appealed and in the meantime Prop. 22 remains in effect.)

In October, the Biden administration joined the fight over worker classification by proposing a new rule that would make it harder for companies to define their workers as independent contractors under the Fair Labor Standards Act. If successful, the rule would reverse a Trump-era regulation that had itself replaced an Obama-era regulation similar to Biden’s proposal, and make it easier for millions of people — from ride-sharing to janitors and construction workers — to become employees to be classified. Approximately “31% of current or new gig workers — totaling 3% of American adults — say this was their primary job over the past 12 months,” per a Pew study.

“While independent contractors play an important role in our economy, we have seen in many cases employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” he said Labor Secretary Marty Walsh when the proposed rule was announced. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

Worker misclassification is a problem that extends well beyond app-based gig workers. Ken Jacobs of the UC Berkeley Labor Center co-authored a study in 2019 That estimates that nearly a quarter of truckers in California — the industry has long been known for misclassifying workers — work as independent contractors. Misclassification among construction workers is also notorious, with a 2011 report estimating that 19% of California construction workers defined as independent contractors were actually traditional employees.

Under Biden’s proposed rule, “there is a very strong case for gig workers being misclassified,” Jacobs wrote in an email to Capital & Main. “The proposed rule would make it easier to detect misclassification in industries with a long history of misclassification, such as janitorial, trucking and construction.”

The new rule would expand the number of factors that must be weighed in determining whether a worker is an independent contractor or employee, including whether the work performed “integral part of the employer’s company.”

On the day the proposed rule was announced, shares in Lyft and Uber fell by about 10%, while Lyft issued a statement that the rule will not reclassify drivers as employees or force the company to change its business model. Previously, both companies had the option to classify their employees as employees via AB 5 threatened with suspension operations in California.

Whatever develops from the proposed legal precedent rule will not be quick, with a 45-day comment period followed by the release of the final rule. Once implemented, the rule would serve as the new standard that the DOL would use to determine worker classification and initiate legal proceedings that could pave the way for decisions reclassifying independent contractors as workers.

Brian Dolber, associate professor of communications at California State University San Marcos, is co-author of the National Equity Atlas report on California drivers and an expert on gig work. He is also a former rideshare driver who now organizes with Rideshare Drivers United. “We are encouraged by the federal government signaling that it is beginning to seriously address misclassifications,” he said. “But there’s definitely a long way to go.”


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