Uber, Lyft could gain from rule

The Labor Department on Tuesday announced a proposal that could deem millions of janitors, construction workers and gig workers to be contractors rather than employees, its most ambitious step toward blessing the business practices of companies such as Uber and Lyft.

Unlike employers, companies that rely on contractors don’t have to pay a minimum wage, overtime or a share of Social Security taxes, or contribute to unemployment insurance and provide workers’ compensation insurance.

The proposal is a socalled interpretive rule, not a regulation that has the force of law. But it could have significant influence were it to be finalized.

It would technically cover only laws that the Labor Department enforced, such as the federal minimum wage and overtime rules. States and other federal agencies, such as the Internal Revenue Service, would be free to make their own determinations, as California has done in a recently enacted law that effectively requires companies such as Uber and Lyft to classify their workers as employees.

But employers tend to follow the department’s guidance, and the determination could have influence in other contexts and jurisdictions.

Findings of employment status typically depend on a variety of factors. But in its proposed rule, the department said two would loom over all others: the extent to which a company controls how a worker performs a job; and the opportunity that a worker has to profit in the job based on initiative, rather than simply earning a steady wage.

The department said other factors could serve as additional “guideposts,” especially if the first two pointed in opposite directions. The additional factors include how much skill the work requires, and whether the relationship between the worker and the company is permanent or temporary.