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New U.S. rule could boost ‘gig economy’ companies while costing American workers billions

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The U.S. Department of Labor finalized a rule Wednesday that could be a boon to app-based gig companies while potentially costing American workers billions of dollars in lost wages and benefits.

The rule establishes a test for determining independent contractor status under the Federal Labor Standards Act, giving more weight to two of five factors, which critics say are favorable to gig companies such as Uber Technologies Inc. UBER and Lyft Inc. LYFT: “the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment.” The other factors are skill, permanence of the working relationship and whether the work is part of an integrated unit of production.

“This rule brings long-needed clarity for American workers and employers,” U.S. Secretary of Labor Eugene Scalia said in a statement.

The rule was proposed in September and its comment period was shortened to 30 days instead of 60 days, in what critics said was the Trump administration’s effort to rush it through before the end of his term. It is expected to go into effect March 8, the Labor Department said in a news release.

The proposal received 1,825 comments, including from the Economic Policy Institute, which estimates that the rule will cost workers — from delivery and transportation workers to those who work at call centers, in agriculture, home health care and elsewhere — at least $3.7 billion a year in pay and benefits.

“This loss to workers is composed of at least $400 million in new annual paperwork costs, and a transfer to employers of at least $3.3 billion in the form of reduced compensation,” wrote Heidi Shierholz, EPI’s senior economist and director of policy. “Further, social insurance funds would lose at least $750 million annually in the form of reduced employer contributions, meaning this rule also results in a transfer of at least $750 million annually from social insurance funds to employers.”

Two dozen state attorneys general and officials from New York City, Chicago, Pittsburgh and Philadelphia asked the Labor Department to withdraw the rule, while business groups and chambers of commerce supported the rule change.

Opponents are optimistic that President-elect Biden’s incoming administration could stop the rule from taking effect and eventually rescind it. Biden has expressed support for different criteria for determining worker classification, the so-called ABC test, which is law in California but not for gig companies, which successfully backed a ballot measure to exempt them from the law in November.

For more: Uber and Lyft win fight to keep drivers as contractors instead of employees in California

“[The Biden administration] will want their own rule, but would need to open that to public comment and of course that would take some time,” said John Logan, professor at San Francisco State University’s Labor and Employment Studies Department.

Among those that would benefit are Uber, Lyft and other gig companies, which have faced challenges around the nation over their treatment of drivers and delivery workers as contractors.

Nicole Moore, a Los Angeles-based organizer with Rideshare Drivers United, said: “Let’s be clear. Taking labor rights away from app-based workers is the agenda of the Trump administration that has never had frontline workers’ interests in mind. But this is not in concrete and the new administration has the power to usher in a better future for all workers.”

The incoming Biden administration has not returned a request for comment. Uber and Lyft have not returned requests for comment.

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Gig worker rights battle moves to Toronto

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The battle for gig worker rights has come to Canada, where the Canadian Union of Postal Workers (CUPW) has launched the Gig Workers United campaign. It is the latest in the global movement to increase wages and improve working conditions for gig workers who rely on app-based companies for employment.

“We have to stand up for ourselves — the streets don’t look out for us, the apps don’t look out for us, so we’re looking out for each other and collectively calling out a bad business model,” Narada Kiondo, one of the courier spokespersons for Gig Workers United, said in a statement announcing the organizing effort. “The way it is just can’t continue — if the gig economy is going to work for our society then it can’t be based on squeezing delivery workers and restaurants for profit and dodging our labor standards. And we’re going to persist, and we’ll win, because our bodies and our livelihoods are on the line.”

The roots of the organizing effort were in a similar effort two years ago. The Justice for Foodora Couriers worked to unionize delivery app Foodora couriers. The German company expanded to Canada in 2015. Foodora claimed that couriers were independent contractors and not entitled to form a union. On March 4, 2020, the Ontario Labor Relations Board ruled that Foodora couriers were “dependent contractors” and therefore could unionize.

On April 27, 2020, Foodora announced it was closing its Canadian operations.

Jan Simpson, national president of CUPW, said the lessons from the Foodora fight are that gig workers have rights to unionize.

“The couriers have shown that traditional union organizing is possible in this space. But they’ve gone farther than that, with community-organizing tactics and collective mutual aid. They’ve formed a worker-led organization that we’re proud to support because their fresh energy and ideas are what it takes to improve working conditions and reject Silicon Valley’s model of exploitation,” Simpson said in a statement.

The battle for gig worker rights is expanding across the globe. Earlier this month, a court in the U.K. ruled Uber Technologies (NYSE: UBER) drivers in London were entitled to minimum wage, essentially making them employees. Uber had appealed a lower court ruling, but the U.K. Supreme Court rejected its argument, saying it was “clear … that claimant drivers were workers who worked for Uber London under ‘worker’s contracts.’” It also said the fact that an Uber driver could turn down work “is not fatal to a finding that the individual is an employee … and does not preclude a finding that the individual is employed under a worker’s contract.”

Read: Prop 22 wins in California; takes Uber, Lyft and other drivers out from under AB5

The nature of the relationship between Uber and its drivers means that the drivers “have little or no ability to improve their economic position through professional or entrepreneurial skill,” the court wrote. “In practice the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”

In the U.S., much of the fight over the status of gig drivers has taken place in California, where voters passed Proposition 22 in November with 58% of the vote. Prop 22 removed Uber, Lyft, DoorDash and other gig drivers from compliance with Assembly Bill 5 (AB5). That bill required companies to treat the drivers as employees.

Prop 22 did include certain provisions for drivers, including new earnings guarantees and health-care stipends among others, but it allows the gig workers to remain independent.

Click for more FreightWaves articles by Brian Straight.

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African fintech startup ImaliPay raises pre-seed funding to service gig economy

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ImaliPay, an African-based fintech start-up is making waves by reshaping the future of work in the gig economy.

The Australian venture capital firm TEN13 reputed for investing in top-tier start-ups has invested an undisclosed amount of pre-seed funding in ImaliPay. ImaliPay joins TEN13’s growing fintech portfolio; the likes of Chipper Cash and Bookipi. Other investors included in the raise are; Finca Ventures, Optimiser Foundation, Mercycorps Ventures, Changecom, and super angels from Norway, Nigeria, UK, and Kenya. The primary aim of the investment is to expand and accelerate its growth and footprint in Kenya, Nigeria, and South Africa to be the one-stop-shop for gig workers’ financial needs.

TEN13’s backing of ImaliPay follows a recent string of events that has elevated the visibility of Africa’s Fintech start-up scene. “We believe this is a perfect opportunity to introduce our growing international network of investment professionals and investors to one of the most exciting emerging Fintech companies in Africa, ” said TEN13 Managing Partner, Stew Glynn.

The growth in the African gig workforce is being propelled by the growth in digitisation and smartphone penetration. Gig workers constitute a significant proportion of the economy within ImaliPay’s target markets and this market segment is expected to grow rapidly over the next decade. ImaliPay offers gig workers a one-stop-shop of financial services such as the ability to seamlessly save their income and receive in-kind loans through a “buy now, pay later” model tied to their trade. Bolt drivers in Kenya can now request a fuel loan and payback after 3-4 days, this allows them to get more work done and Safeboda riders in Nigeria can now buy on credit bike parts, fuel, and smartphones to keep their gig moving and reduce any downtime. Other products to be offered off the platform include insurance and investment options to foster a safety net for this hard-working but vulnerable part of the population.

ImaliPay was co-founded in 2020 by Zimbabwean Tatenda Furusa and Nigerian Sanmi Akinmusire who met whilst working at leading payments company Cellulant. They believe the backing of the start-up by a notable venture capital company such as TEN13 has tremendous benefits. “It’s a great opportunity for investors to participate in the fintech revolution and a fast-growing segment. Our vision at ImaliPay is to advance financial health and inclusion for gig workers who struggle to manage and access flexible financial services that are often only available to traditional SMEs”, said Furusa.

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EU seeks views on gig workers’ rights ahead of possible law

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By Foo Yun Chee

BRUSSELS (Reuters) – The European Commission on Wednesday took a step towards improving the rights of gig economy workers with the launch of a public consultation to determine their legal employment status and how to improve their working conditions.

Lockdowns to contain the COVID-19 pandemic have increased demand for casual workers as food deliverers have hired drivers, while cleaners, needed to battle the spread of infection, have faced health and safety risks.

Courts and regulators have meanwhile sought to correct the shortcomings in the gig economy.

The UK Supreme Court ruled last week that Uber drivers are entitled to workers’ rights, such as the minimum wage, and a Spanish court said in September that riders for Barcelona-based food delivery app Glovo were employees, not freelancers.

The EU executive said it wants feedback from trade unions and employers’ groups during the six-week consultation. A subsequent consultation will look into the content of a possible law by the end of the year unless unions and employers decide to negotiate the issue themselves.

“There is no going back as to how things work. The platform economy is here to stay, new technology, new sources of knowledge, new forms of work will shape the world in the years ahead,” the Commission’s digital chief Margrethe Vestager told a news conference.

“These are new opportunities that must not come with different rights, online as well as offline. All people should be protected and allowed and enabled to work safely and with dignity,” she said.

The consultation listed seven areas for possible improvement – the employment status of gig workers, their working conditions, access to social protection, access to collective representation and bargaining, cross-border aspects, the companies’ use of algorithmic management and training and professional opportunities.

Uber said it would work with policymakers and social groups on the proposal.

“Any legislative initiative should be grounded in what platform workers value most – flexibility and control over their work, transparent and fair earnings, access to benefits and protections, and meaningful representation,” the company said in a statement.

Small companies lobbying group SME Connect urged the Commission to expand the consultation to other groups.

“Looking at these issues solely through the prism of employees/employers’ organisations risks a failure to account for these platforms and those who work on them,” its president Paul Rübig wrote in a letter to Vestager.

(Reporting by Foo Yun Chee; editing by Philip Blenkinsop and Barbara Lewis)

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