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FTC sends a warning to Uber, Lyft, DoorDash and other 'gig-work' companies

8:45 am ET September 19, 2022 (MarketWatch)

By Levi Sumagaysay

Federal regulator adopts policy statement that seeks to protect gig workers from a 'power imbalance' that leaves workers 'more exposed to harms from unfair, deceptive and anticompetitive practices and is likely to amplify such harms when they occur'

The Federal Trade Commission announced Thursday that it plans to crack down on the exploitation of gig workers, whom the agency said are entitled to protection regardless of their worker classification.

The commission adopted a policy statement that details issues gig workers face -- including deceptive claims about their wages and hours, unfair contract terms and more -- and what the FTC plans to do about it. Though the commission did not mention any companies by name, the message is clear: It plans to hold "gig-work" mainstays like Uber Technologies Inc. (UBER), Lyft Inc. (LYFT), DoorDash Inc. (DASH) and Instacart accountable for the promises they make to potential workers and how they treat the ride-hailing drivers and delivery workers who use their platforms.

Gig companies consider their workers independent contractors and have fought to keep doing so. President Joe Biden campaigned on addressing worker misclassification; this is the first action under his administration that specifically promises enforcement over gig companies' treatment of their workers.

In-depth: The legal definition of 'gig work' is still in limbo

"No matter how gig companies choose to classify them, gig workers are consumers entitled to protection under the laws we enforce," Samuel Levine, director of the FTC's Bureau of Consumer Protection, said in a statement.

Cherri Murphy, a former Lyft driver and an organizer with Gig Workers Rising in California, cheered the FTC announcement Thursday.

"Too many people for far too long have been lured in to gig work, with the promise of entrepreneurship that's just not there," Murphy said.

Citing Federal Reserve statistics, the commission said in its 17-page policy statement that 16% of Americans now earn money through "an online gig platform," and that the gig economy "touches nearly every aspect of American life, from food delivery to transportation to household services." The FTC also cited its own report that shows gig workers are disproportionately people of color -- Latino, Black and Asian adults comprise 69% of gig workers, according to the report, with only 12% of workers identifying as white.

Read also: Bill to enshrine gig work into federal labor law 'would effectively get rid of the minimum wage and overtime compensation'

According to the policy statement, the FTC will focus on gig-economy issues that include deception or misrepresentation about how much workers could earn and how much flexibility they actually have, as well as the responsibilities put on workers vs. the companies. The commission noted that gig companies control gig workers through algorithms, which are hidden in a system that fosters a "power imbalance," leaving workers "more exposed to harms from unfair, deceptive and anticompetitive practices and is likely to amplify such harms when they occur."

The commission said it plans to complement work other federal agencies are doing by examining unlawful business practices and "harms to market participants." It mentioned that it has already started rule-making proceedings related to deceptive wage claims, and last fall it issued related notices to companies like Amazon.com Inc. (AMZN), which uses the gig-work model for some of its drivers, plus Uber, Lyft, DoorDash, Instacart and Grubhub.

For more: Uber, DoorDash, Lyft and Amazon could face billions in fines if they mislead over wages, FTC official warns

Flex Association, a trade group representing Uber, Lyft, DoorDash, Instacart, Grubhub, Gopuff, HopSkipDrive and Shipt, which is owned by Target Corp. (TGT), said it was present during Thursday's open meeting, where the FTC voted 3-2 to adopt the policy statement.

"During today's meeting, we heard from workers and advocacy groups emphasizing how app-based work provides flexibility and independence that lets millions of people earn additional income on their terms," said Kristin Sharp, chief executive of Flex, in an emailed statement. "What's missing from the FTC's policy statement is the perspective of those very workers the agency seeks to protect."

Uber shares declined in late-afternoon trading, when the FTC announcement was released, but still closed up 0.2% at $33.13 before dipping a bit more in after-hours trading. Lyft shares ended the session down 0.7% at $16.99, and DoorDash stock slipped 0.2% to $64.41.

-Levi Sumagaysay


(END) Dow Jones Newswires

September 19, 2022 08:45 ET (12:45 GMT)

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