The Securities and Exchange Commission announced a new proposal on Tuesday, which could allow companies like Uber Technologies Inc (NYSE: UBER) and LYFT Inc (NASDAQ: LYFT), and DoorDash to compensate gig economy workers in equity.
What Happened: The regulator has proposed a pilot program for tech aggregators that hire gig economy workers or drivers, under which the companies can pay up to 15% of the worker compensation (not exceeding $75,000 in three years) in stock rather than cash.
SEC Chairman Jay Clayton clarified the rationale behind the proposal by saying work relationships have evolved along with technology, and gig economy workers are a vital cog in the broader U.S. economy's growth.
The proposal will be open to a 60-day public comment period and may come into force only under the new leadership chosen by President-elect Joe Biden.
Why It Matters: California attorney general had sued both Uber and Lyft earlier this year for not following the California Assembly Bill 5, which forced aggregators to reclassify workers as employees, making them entitled to similar benefits. However, the ride-hailing companies won the Proposition 22 referendum that exempts it from reclassifying gig workers.
In a bid to garner support for the referendum, the companies had guaranteed other benefits such as health insurance for drivers who work 15 hours or more a week, occupational-accident insurance coverage, and 30 cents for every mile driven, among other protections.
Price Action: On Tuesday, UBER shares closed higher by 2.42% at $51.26, and LYFT shares were higher by 0.36% at $39.49.
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