Market Overview

What Uber, Lyft Investors Should Know About Proposed New Federal Employment Rule

What Uber, Lyft Investors Should Know About Proposed New Federal Employment Rule

Uber Technologies Inc (NYSE: UBER), LYFT Inc (NASDAQ: LYFT) and other gig economy employers in California have a lot riding on the November election, when voters will have a chance to weigh in on Proposition 22.

The ballot question would exclude these companies from new state laws requiring gig economy companies to classify their workers as employees rather than independent contractors.

Yet a new federal rule could soon change worker classification on a national level.

What Happened: On Tuesday, the Labor Department proposed a rule that would clarify the differences between contractors and employees.

The new rule would consider two primary factors: the nature and degree of the worker’s control over the labor and the worker’s opportunity for profit or loss based on initiative and/or investment. The new rule would also consider factors such as the amount of skill required for the job, the permanence of the position and whether the work contributes to an integrated production unit.

Why It’s Important: The new federal rule is likely good news for Uber and all other gig economy companies, BofA Securities analyst Justin Post said in a note. 

“The language of the ‘economic reality test’ (determining if a worker is economically dependent on the company) may seem negative for Uber at first glance, but the underlying factors to
determine the economic reality are in Uber’s favor,” the analyst said. 

Unfortunately for Uber and Lyft, Post said state law will likely supersede the federal rule, so California’s AB5 and Prop 22 remain critical for the companies in the near-term.

The BofA analyst said he is optimistic Prop 22 will pass in California, adding that any polling on the issue leading up to the election could create additional volatility in the stock.

BofA Securities has a Buy rating on Uber with a $44 price target.

Benzinga’s Take: Prop 22 may be the major catalyst for Uber in the fourth quarter, but rising COVID-19 cases in Europe are also a major catalyst.

Fortunately for Uber investors, Uber’s risk associated with potential lockdowns is mitigated in part by its Uber Eats food delivery business.

Related Links:

Why It's Unlikely Warren Buffett Is Actually Investing In Snowflake

Uber Analyst Expects California's Prop 22 To Pass Based On Latest Polling

Photo courtesy of Uber. 

Latest Ratings for UBER

Oct 2020Morgan StanleyMaintainsOverweight
Oct 2020MizuhoMaintainsBuy
Aug 2020CitigroupMaintainsBuy

View More Analyst Ratings for UBER
View the Latest Analyst Ratings


Related Articles (UBER)

View Comments and Join the Discussion!

Posted-In: Analyst Color Government Regulations Price Target Politics Reiteration Analyst Ratings General Best of Benzinga

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at