Why Lyft Stock Is Plunging Today

Lyft Inc LYFT shares are trading lower Tuesday on reports the U.S. Department of Labor has released a proposal to make companies reclassify independent contractors as employees.

According to a New York Times report, the Labor Department on Tuesday issued a new proposal that would make it more likely for millions of workers to be classified as employees rather than independent contractors.

The report indicates that the proposed rule is essentially just a test that the Labor Department will run to determine if workers are classified as contractors or employees. Companies are required to provide certain benefits and protections to employees, but not to contractors.

"While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors," labor secretary Martin Walsh said in a statement.

"Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages."

Lyft previously said that having to treat drivers as employees could force the rideshare company to adjust its business model.

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LYFT Price Action: Lyft has a 52-week high of $46.64 and a 52-week low of $11.96.

The stock was down 13.5% at $11.08 Tuesday morning, according to Benzinga Pro.

Photo: courtesy of Lyft.