Labor secretary says gig workers should be classified as employees in ‘a lot of cases’

Labor Secretary Marty Walsh said that a lot of gig workers are misclassified as contractors on Thursday, sending stocks of tech companies such as Uber, Lyft and DoorDash falling amid speculation about the future of the fraught business model in the Biden administration.

“We are looking at it, but in a lot of cases gig workers should be classified as employees,” Walsh told Reuters. “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.”

The comments, which were pulled from a larger interview with Reuters that was not published in full, were interpreted as signal that the Department of Labor could move more aggressively to crack down on the use of contract labor by some of Silicon Valley’s most prominent companies.

Many labor policy experts say that gig companies Uber, Lyft and DoorDash improperly classify their workers as contractors, instead of as employees. This lowers the companies’ labor costs but leaves workers in a more precarious position, as contractors are not typically subject to protections like minimum wage laws, mandatory overtime, unemployment insurance, worker’s comp and other benefits.

But the Labor Department cautioned against reading too deeply into Walsh’s comments, saying it was in line with other public moves the agency has made on the question of gig work since Biden was inaugurated.

Earlier this year, the department’s Wage and Hour Division withdrew a Trump-era letter indicating that gig workers were typically properly classified as independent contractors.

“The Secretary was reiterating that misclassification is a pervasive issue that impacts both the economy and workers,” a spokesman said in a statement. “Worker protections under federal law create a safety net of security and benefits that provide ladders of opportunity into the middle class. This safety net should be further strengthened. As our recovery continues, we should be supporting the employer-employee relationship and all of the opportunities that it provides.”

The Labor Department also reportedly plans to nominate David Weil, a leading proponent of the push to crack down on worker misclassification, who has criticized the business model of gig companies, to lead the Wage and Hour division again, according to Bloomberg Law. Weil ran that division during the Obama administration.

Uber’s stock price was down 5.9%, Lyft was down 9.9% and DoorDash was down 7.6% on Thursday afternoon.

The companies did not respond to immediate requests for comment.

The perspective that many gig workers are more properly classified as employees has been reinforced at times by court rulings and government regulators in states like California, Massachusetts, New York and New Jersey.

But the companies argue that their workers are properly classified as contractors, working aggressively to beat back attempts to regulate their workforce. Company officials say that they will not able to offer the workers the same flexibility, if they are found to have improperly classified their workers, and are pushed to classify them as employees.

In California, where the legislators passed a law to crack down on the issue of misclassification that was aimed at gig workers, the companies bankrolled a $200 million ballot measure to exempt themselves. After the measure passed in November, the companies’ stocks soared.

But the question of how the federal government will deal with the question remains one of the most pressing labor issues facing the Biden administration.

Because gig companies don’t pay into unemployment insurance systems for their workers, the federal government created a new program – and footed the bill – for unemployment payments for gig and self-employed workers during the pandemic, underscoring questions about the companies’ lack of support for its workers.

Walsh has been noncommittal about the question of gig work so far, telling The Post on March 24 that he needed to be briefed more on the matter before commenting.