Joe Biden and Donald Trump have some similarities in their stances on certain companies, like U.S. Steel Corp. X, -0.34% or China’s electric-vehicle makers. However, when it comes to gig-economy companies, the two rivals in the White House race have taken different approaches.
Towards the conclusion of Trump’s presidency, the Labour Department introduced a regulation to determine the classification of workers as either employees or independent contractors. This regulation was seen as beneficial for companies such as Uber Technologies Inc., Lyft Inc., and DoorDash Inc.
The Labour Department under Biden swiftly intervened to prevent the implementation of a regulation that would have posed challenges for gig workers, like Uber drivers, in being recognised as employees eligible for minimum wages and benefits.
Earlier this year, the Labour Department implemented a new rule that requires employers to evaluate six criteria when determining a worker’s classification as an employee or a contractor. This rule represents a shift from the previous administration’s emphasis on only two criteria.
According to Andrew Lokay, a senior research analyst at Beacon Policy Advisors, the Biden administration has shown a greater inclination towards supporting labour. Biden’s new rule seeks to increase the difficulty of categorising workers as independent contractors, according to his statement.
Although Uber, Lyft, and other app-based platforms have expressed that the new rule will not require them to reclassify their drivers, Lokay believes that the lawsuits filed by business groups against the regulation indicate its importance. “If it didn’t have significant consequences, we wouldn’t witness such strong opposition from the business community,” he remarked.
Worries surrounding the gig-work regulations implemented by the Biden administration have had a negative impact on gig-economy stocks. The selloffs witnessed in 2021 and 2022 have been attributed to the actions taken by the Labour Department under his administration.
According to analysts at TD Cowen, there is a possibility that in a potential second term for Biden, the Labour Department may take legal action against certain gig companies for potentially misclassifying their workers as independent contractors. That type of lawsuit could potentially arise before the November presidential election, but it would be considered politically risky, according to analysts, due to the popularity of these services among most Americans.
According to the TD Cowen team, the future of gig companies in a potential second term under Biden would hinge on the individual leading the Labour Department. According to analysts, it is unlikely that Current Acting Secretary Julie Su will be able to secure the job, even in a Democrat-controlled Senate, due to her pro-worker and anti-gig company stance.
According to analysts at TD Cowen, a Trump victory in November would significantly decrease the potential risks that gig companies currently face from the federal government’s actions. It has been suggested that under a Trump Labour Department, there is a high probability of reinstating the gig-worker rule from four years ago. Additionally, there is a likelihood of avoiding legal action against gig companies and withdrawing any lawsuits initiated during the Biden administration that could potentially impact these companies in the upcoming months.
However, according to Beacon’s Lokay, a Republican victory in the White House race would not necessarily guarantee success for gig companies. He predicted that the push for regulation of the gig economy, including rideshare companies and app-based food-delivery services, will persist in states such as Massachusetts or California.
The Massachusetts Supreme Judicial Court is currently considering the approval of two ballot initiatives that specifically address gig workers. Additionally, there is a separate case in the state that revolves around the question of whether Uber and Lyft improperly classified their drivers as contractors. In California, the state’s highest court is still deliberating on the outcome of a ballot initiative that received 59% support. If approved, this initiative would grant gig companies the ability to classify their drivers as contractors.
Furthermore, Uber and Lyft are considering halting their operations in Minnesota due to their objections towards new rideshare regulations. “The potential downside for gig companies facing regulation in a state such as Minnesota is not solely the risk of being barred from the Minnesota market if they decide to halt their services there,” Lokay explained to MarketWatch. There is a possibility that other blue states may be influenced by this, as regulations in one state could serve as a blueprint for lawmakers in other states.
