Letting drivers work for competitors demonstrates that they’re contractors and not employees.
If you use Uber regularly, you’ve probably climbed into a car that displays a sticker for its rival Lyft —and vice-versa. That’s good for drivers because it increases their opportunities to make money and set their own schedule. Permitting drivers to work for competitors may be a smart move by those “gig economy” companies, too. It may prove crucial in allowing them to retain their preferred business model.
The Labor Department is gearing up for a formal rule-making later this year on the controversial question of when workers are traditional employees or independent contractors. Most gig-economy companies rely on contractors, arguing that the flexibility that arrangement provides is crucial. Workers are treated as independent businesses, which allows them to set their hours and work as much or as little as they want. Since most ride-share drivers do it on the side for a few hours a week to earn extra income, the flexibility that comes with being a contractor is appealing.
Critics like California Gov. Gavin Newsom say that’s a smoke screen companies use to avoid complying with federal and state regulations like minimum-wage and overtime rules, which don’t apply to contractors. California passed its AB5 law last year to force gig-economy employees to classify workers as employees.
The issue is ostensibly covered by the Fair Labor Standards Act, but the law does not provide a clear definition of “employee.” Rather, it looks at the totality of the circumstances. Hence the need for the department’s rule-making.
The department hasn’t said what the rule will look like, but a guidance letter released last year by its Wage and Hour Division to an online company offers insight into its thinking.
Read the full article at The Wall Street Journal.