US Labor Secretary says most gig workers should be classified as employees

President Joe Biden's top labor official said Thursday that most gig workers in the United States should be classified as "employees" deserving of related benefits, in what could be a policy shift that is likely to raise costs for companies that depend on contractors such as Uber and Lyft and impact millions of workers.

Shares of Uber fell as much as 8 percent while Lyft dived as much as 12 percent. Doordash fell nearly 9 percent and Grubhub was down 3.3 percent.

Labor Secretary Marty Walsh, a son of Irish immigrants and a former union member, has been expected to boost President Biden's efforts to expand workers' protections and deliver a win for the country's organized labor movement.

Read more: Empty seats, historic turns: Biden delivers unique speech to US Congress

"We are looking at it but in a lot of cases gig workers should be classified as employees... in some cases they are treated respectfully and in some cases they are not and I think it has to be consistent across the board," Walsh told Reuters in an interview, expressing his view on the topic for the first time.

"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," he said.

Walsh's work at the Department of Labor is expected to have a major impact on US workplace laws and regulations, including vigorous enforcement of occupational safety and health rules, overtime payments and proper administration of employee benefit plans.

The US Bureau of Labor Statistics reported in 2017 that 55 million people in the United States were gig workers - or 34% of the workforce - and was projected to rise to 43% in 2020.

Walsh's views on the issue could usher in new rulings from the department, which sets legal guidelines for how employers treat workers. Before his appointment, the Labor Department's Wage and Hour Division proposed rescinding a rule adopted in January that would have made it easier to classify workers as independent contractors.

Walsh said the Department will have conversations with companies that employ gig labor in the coming months to make sure workers have access to consistent wages, sick time, health care and "all of the things that an average employee in America can access."

The Department's decision could have far-reaching implications on ride-hailing services such as Uber Inc, Lyft and food delivery apps such as Grubhub Doordash and Postmates. The companies did not immediately respond to requests for comment.

Gig workers are independent contractors who perform on-demand services, including as drivers, delivering groceries or providing childcare - and are one-third more likely to be Black or Latino, according to an Edison Research poll.

Walsh also spoke about the risks that result from not having gig companies paying unemployment insurance for such workers - a scenario that has played out during the pandemic, leaving the US government to foot the bill.

"If the federal government didn't cover the gig economy workers, those workers would not only have lost their job, but they wouldn't have had any unemployment benefits to keep their family moving forward... we'd have a lot more difficult situation all across the country," he said.

The last decade has seen a surge in the number of gig workers, indicating broad economic and demographic shifts and raising concerns around long-term financial security for a growing share of the workforce, according to some experts.

Latest news playlist