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Uber, Lyft plunge as Biden proposal could see contract workers become full-time employees


Close-up of a couple using GPS while driving a car

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Uber Technologies (NYSE:UBER) and Lyft (NASDAQ:LYFT) fell sharply on Tuesday after the Biden Administration released a proposal that could lead to contract economists becoming full-time employees.

Ministry of Labor disclosure The new proposal will require companies to provide workers such as sanitation, homecare and construction workers, as well as carpool drivers, classified employees rather than independent contractors.

“While independent contractors play an important role in our economy, we have seen many cases where employers misclassify their employees as independent contractors, Labor Secretary Marty Walsh said in a statement. “The misclassification deprives workers of their rights to federal labor protections, including their right to be paid in full their legally earned wages.”

It is expected that the new proposal, assuming it becomes law, will take several months to be enacted.

Update: In one blog postLyft (LYFT) said there is no “immediate or direct” impact on the company’s business at this time, and it expects this from the Biden Administration.

Lyft (LYFT) added that the rule would not reclassify Lyft drivers as employees and would not force the company to change its business model.

Both Uber (UBER) and Lyft (LYFT) covered their losses after the statement, because Uber down more than 6% to $25.82 while Lyft (LYFT) down more than 7% to $11.91.

Uber (UBER) and Lyft (LYFT) had previously given in to the drivers, but firmly refused to let them become full-time employees.

The proposed rule would repeal the previous rule announced on January 7, 2021 – stemming from the Trump Administration – and would replace it with analytics to determine the status of employees or independent contractors. established as “more in line” with the Fair Labor Standards Act.

The Department of Labor said: “The Department believes its proposed rule will reduce the risk of employees being misclassified as independent contractors, while providing additional certainty for businesses that participate (or want to) engage) with individuals who are in business for themselves”.

In an investor note, Wedbush Securities analyst Dan Ives called the proposal a “blow” to the contract economy, noting that it added uncertainty.

Ives wrote: “While this is a rule of thumb for now, it will cause some uncertainty for Uber and Lyft as the Street worries about potential ripple effects from the new changes.” this one of the Beltway”.

Only on Tuesdays, Lyft (LYFT) speak it is testing a new feature that allows drivers in certain US cities, including Detroit, Cleveland, Charlotte, etc., to see the destination and how much they will earn before accepting the ride .

In addition, drivers will also have access to detailed information such as pick-up and drop-off locations, estimated trip time and distance to complete the trip, as well as a map view of the vehicle. whole trip.

In total, 18 US cities are part of the upfront initiative, with Lyft (LYFT) added that more cities are coming this year.

Uber (UBER) speak on Tuesday that it would discontinue the car-sharing app in five Pakistani cities in an effort to reduce overlap between it and the Careem unit.

Last week, RBC downgraded Lyft (LYFT) noted concerns about “structural obstacles” and the point that Uber Technologies (UBER) can have a competitive advantage.

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