Uber stock, Lyft, Labor down.Proposal | Investor Business Daily

The Labor Department on Tuesday unveiled a highly anticipated proposal that could reclassify millions of independent contractors as employees. The news hit Uber’s stock hard, as well as Lyft and DoorDash’s shares.


Uber shares fell 7.2% to 25.55 in stock market trading this afternoon after the proposal was released. Lyft shares fell 7.6% to 11.80. Meanwhile, DoorDash fell 5.6% to 45 points.

so called gig driver Uber (Uber) and Lyft (LYFT) – and food delivery workers door punch (DASH) and others – Income-generating activities outside the traditional long-term relationship between employer and employee.

Also, unlike traditional full-time jobs at a single company, gig workers often work for one or more employers as short-term, temporary, or independent contractors. The definition of gig workers can include construction workers, janitors and home care workers. Others include freelancers and project-based workers.

“While there’s a lot of uncertainty about how the federal and state will handle this latest proposal, it’s a clear blow to the gig economy, as well as companies like Uber and Lyft,” Wedbush analyst Dan Ives said in a note. near-term concerns.” to the client.

Uber stock: Facing legal battle over interests

Since the rise of Uber and Lyft, gig workers have become popular, sparking a legal battle that could force workers to pay overtime, payroll taxes and Social Security benefits. The Labor Department’s proposal could change that.

Companies must provide certain benefits and protections to employees, but not contractors.

“While independent contractors play an important role in our economy, we have seen in many cases employers misclassifying their employees as independent contractors,” Labor Secretary Martin J. Walsh said in a written statement Say. “Misclassification deprives workers of their federal labor protections, including their right to full legal wages.”

“With ride-sharing and other gig economy players reliant on contractors’ business models, categorizing employees would essentially upend the business model and lead to some major structural changes,” Wedbush’s Ives said.

Is Labour’s proposal exaggerated?

The Labor Department’s proposal does not currently have the legal force of a statute specifically authorized by Congress. Therefore, it only applies to laws enforced by the department, such as the federal minimum wage.

“While this is currently an interpretive rule, it will create some uncertainty for companies like Uber and Lyft as Wall Street worries that these latest Beltway changes could have a knock-on effect,” Ives wrote.

But RBC Capital Markets analyst Brad Erickson believes the Labor Department’s ruling is overstated.

“We think this is somewhat (largely) no fuss, as the ruling appears to be more directly targeting industries like healthcare, construction and food services,” Erickson wrote in a note to clients. “The bigger picture, we think the long-term risks and the likelihood of this happening are low.”

Uber shares are down 40% this year.

Follow Brian Deagon on Twitter @IBD_BDeagon Learn more about tech stocks, analytics and financial markets.

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