New DOL rule could create headline risks for gig companies, says Compass Point

Compass Point notes that the Department of Labor, or DOL, released a final rule addressing worker classification at the federal level aimed at providing guidance to companies on whether to classify workers as employees or independent contractors, which takes effect on March 11. The final rule, which is substantially the same as the proposed rule released in October 2022, implies that gig economy companies like Uber (UBER), Lyft (LYFT), and DoorDash (DASH) should classify their drivers as employees instead of independent contractors, but the firm believes the Biden DOL has limited ability to directly force gig companies to reclassify their workers as employees. Still, though the “courts, not DOL,” have final say on worker classification, the firm sees the potential for continued headline risk around the issue given the view that the Biden DOL is likely to open investigations into how the gig companies classify their workers, which could eventually lead to lawsuits, the analyst added.