As a new presidential administration and a Democratic Senate majority settle in, and with continuing developments in California, 2021 is shaping up to be another big year for the gig worker-classification issue.

Thursday, Democrats reintroduced the Protecting the Right to Organize Act, a sweeping labor-rights bill that was passed by the House last year. Among other things, it would amend the National Labor Relations Act to adopt the test that would likely require Uber Technologies Inc. UBER, +1.21%, Lyft Inc. LYFT, +0.55% and other app-based gig companies to classify drivers and delivery workers as employees instead of independent contractors, as the test does in California.

In November, California voters approved Proposition 22, on which gig companies Uber, Lyft, DoorDash Inc. DASH, -2.10% and Instacart spent more than $200 million. Their win exempts them from that state law, which courts had ordered them to follow.

After the gig companies’ victory in their home state, where the measure they pushed through gives gig workers some new benefits that fall short of full employee protections, they promised to expand the Proposition 22 model to other parts of the country and the world. And they are spending millions on lobbying in Washington as they work to preserve their business models, which rely heavily on keeping their on-demand workers as independent contractors.

Besides the PRO Act, the companies could run into opposition from President Joe Biden’s administration. The campaign platform of the president — who has a bust of labor leader Cesar Chavez in the Oval Office — included a promise that he would “put a stop to employers intentionally misclassifying their employees as independent contractors.” Biden and Vice President Kamala Harris both opposed Proposition 22. And Marty Walsh, his nominee for labor secretary whose confirmation hearing was Thursday, was once a union leader and has been critical of gig companies.

Catherine Fisk, professor at UC Berkeley who teaches labor and employment law, noted that Walsh’s background in construction — he headed the Building and Construction Trades Council — means he is more than familiar with a worker class that’s protected by basic labor laws.

“He knows from personal experience how unionization has long worked well for short-term ‘gig’ workers and for the entities that hire such workers, and why treating them as employees entitled to legally mandated minimum labor standards is both essential and possible,” Fisk said.

Under Walsh, the Department of Labor could undo what the previous administration did, including a last-minute change in the definition of an independent contractor under the Federal Labor Standards Act, which is favorable to gig companies and is set to take effect March 8.

Andy Stern, a former president of the Service Employees International Union and senior fellow at the Economic Security Project, said during a TechEquity panel at the end of last month that workers have “a real opportunity” to gain rights under the new administration. He pointed to Biden’s early executive orders, including restoring collective-bargaining power and protections for federal workers, directing OSHA to release guidance about COVID-19 and more.

“This is not normal,” Stern said. “We have a door open. Can we organize workers to take advantage of it?” He added that regardless of worker status, “there’s nothing that says independent contractors can’t get workers comp or PTO.”

Employee classification for gig workers is far from assured under the new administration. For one thing, the issue is not strictly partisan; some Democrats side with gig companies’ thinking that a “third way” is necessary for gig workers because they have more schedule flexibility than other employees.

App-Based Work Alliance, a coalition backed by the gig companies, this week urged the administration to “address the rapidly evolving needs of the 21st century workforce. The millions of Americans who choose and rely on flexible work are looking to the new administration to embrace modern policies that provide certainty in an uncertain economic time.”

Jane Oates, a former Labor Department official under President Barack Obama and now president of WorkingNation, a nonprofit that explores the future of work, said, “We’re gonna have to rebuild this economy on labor-management partnerships.”

She called the classification issue complicated, but said Walsh is a “great choice” for labor secretary, suggesting that he may be open to some sort of compromise on the classification issue and that “unions and businesses love him.” Oates also thinks Biden’s pick to be deputy labor secretary, Julie Su, who’s currently secretary for the California Labor and Workforce Development Agency, will be a good complement to Walsh.

Gig workers and companies have been on a rollercoaster ride in California, where on Wednesday the state Supreme Court declined to hear a lawsuit that seeks to overturn Proposition 22. The state’s highest court said the suit should be filed in a lower court; the plaintiffs said they are exploring “every option.”

In addition, gig companies could be on the hook for a court decision last year — before Proposition 22 passed — that ordered them to classify their workers as employees.

The companies are also likely to be subject to scrutiny by a newly established Worker Rights and Fair Labor Section at California’s Justice Department. The new section will have additional staff focusing on worker protection, according to an announcement Jan. 28 that said it would “help bring increased focus and expertise to implement policy and protect against workplace issues,” including employee misclassification and wage theft.

Last year, California’s labor commissioner sued Uber and Lyft, accusing them of wage theft because of driver misclassification. The lawsuits seek back wages, damages and penalties, including over the companies’ failure to provide minimum wage, breaks, overtime pay and more.

After the passage of Proposition 22, worker groups say drivers and delivery workers continue to need stronger protections. One new benefit for gig workers under the measure is a health care subsidy if they work at least an average of 15 hours a week.

But workers must be the primary policy holders for existing health-care plans to qualify for the quarterly stipends. Those who use government aid such as Medicare or Medicaid are not eligible.

In other words, “they’re too poor to get the health care subsidy,” said Nicole Moore, a Lyft driver and an organizer for Los Angeles-based Rideshare Drivers United.

*By Levi Sumagaysay, Market Watch*