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Uber, Lyft slump as feds propose big change to gig economy

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Shares of Uber, Lyft and DoorDash fell about 10% on Tuesday on fears that a US proposal to discourage corporations from treating staff as independent contractors would raise costs for the hardly profitable firms.

The US Labor Department’s proposal would require staff to be considered an organization’s employees – who’re entitled to more advantages and legal protections than contractors – after they are “economically dependent” on the corporate. 

Analysts said there may be numerous uncertainty across the proposal expected to come back into effect next 12 months, however the move was “a transparent blow to the gig economy.”

“Changing staff’ classification is more likely to cost corporations more, and at once they’ll find it hard to pass those additional costs onto their customers who’re already considering hard about their each day spend,” AJ Bell financial analyst Danni Hewson said.

Analysts said there may be numerous uncertainty across the proposal expected to come back into effect next 12 months, however the move was “a transparent blow to the gig economy.”REUTERS

Gig corporations employ independent contractors as an alternative of full-time staff, giving them the flexibleness of working any time of the day and taking a percentage of the cash they make, without providing medical insurance or other advantages.

Signing them up as employees could mean additional costs for corporations and reduce the cut they take from every sale, delivery or ride.

Lyft said the move does not require a change of its business model, while Uber said it plans to interact with authorities.

Gig corporations have long been criticized for the dearth of advantages they provide their independent contract staff, who’ve also faced an increase in living costs this 12 months.

The businesses have rejected calls for reclassification, saying surveys showed the vast majority of their staff don’t want to be employees. They’ve as an alternative suggested limited profit models while maintaining staff’ contractor status.

“A classification to employees would essentially throw the business model the other way up and cause some major structural changes if this (proposal) holds,” Wedbush said.

Slammed by the fears, Uber, Lyft and DoorDash were set to erase over $10 billion of their collective market valuation.

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