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Biden’s Labor Department Is Planning To Shake Up A Key Rule For Gig Workers

  • The Biden administration, following a steady campaign from labor activists, plans to repeal a Trump-era rule that made it more difficult for gig workers to be classified as employees, and thus qualify for minimum wage, overtime and other benefits.
  • Responses from affected industries have been mixed, while app-based businesses expressed little concern, retailers and contractors slammed the move.
  • “While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Labor Secretary Marty Walsh. 

The Department of Labor on Tuesday announced a proposed change to rules governing independent contractors that could re-classify millions of gig workers as full employees, dramatically increasing their chances to obtain certain benefits.

The Labor Department repeatedly characterized the move as a way to reduce “misclassification” of workers who deserved to be counted as employees in a document explaining the rule change. If the new rule is approved, millions of workers that do not currently qualify for minimum wage, overtime, Social Security contributions and other benefits, could see their standing reconsidered, according to The New York Times.

The change revokes Trump-era rules that made workers’ control of their workload and chance to control revenue the two “core factors” used to determine whether an employee is an independent contractor, according to the Department of Labor. The new standard under the Fair Labor Standards Act would revert to testing whether the worker is “in business for themself,” or “economically dependent on the employer for work,” by examining a broad variety of economic circumstances.

Labor activists have pressured the Biden administration to take action on repealing the Trump-era rules, and promote more aggressive policy favoring gig workers, according to the NYT. Labor groups, such as AFL-CIO and grassroots groups of drivers, initially saw a victory in a 2019 California law that classified gig workers as employees, before a $200 million lobbying campaign resulted in a ballot measure that exempted gig workers in exchange for some benefits a year later.

DoorDash and Uber, companies that largely depend on independent contractors, said they did not anticipate meaningful changes to their business models as a result of the rule change, in separate statements to the DCNF.

“The Department of Labor listened to drivers, who consistently and overwhelmingly state that they prefer the unique flexibility that comes with being an independent contractor,” said CR Wooters, Uber’s Head of Federal Affairs. “[Tuesday’s] proposed rule takes a measured approach, essentially returning us to the Obama era, during which our industry grew exponentially.”

The companies directed the DCNF to multiple polls they claim show overwhelming support among their independent contractors to maintain their status as contractors.

However, the move has drawn sharp criticism from trade groups in other industries.

“The current rules clearly define the difference between employees and independent contractors, providing much-needed legal certainty for employers, employees and independent contractors alike,” Senior Vice President of Government Relations David French at the National Retail Federation said in a statement. “The changes being proposed by the Labor Department will significantly increase costs for businesses across all industries, and further drive already rampant inflation.”

“ABC is deeply disappointed that the Biden DOL is moving forward with a proposed rule that will disrupt legitimate independent contractors, which are an essential component of the construction industry,” Ben Brubeck, vice president of regulatory affairs at the Associated Builders and Contractors said in a statement. “Independent contractors provide specialized skills, entrepreneurial opportunities and stability during fluctuations of work common to construction. Rescinding the commonsense 2021 final rule will increase the confusion and litigation chaos that has bedeviled the regulated community for years.”

Current policy is abusive to workers, promotes wage theft and grants some businesses unfair advantages by improperly categorizing some workers as independent contractors, the Labor Department argued in its press release.

“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Secretary of Labor Marty Walsh in a press release. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.”

Walsh has said in the past that if contractors better understood the tradeoffs, “95 percent of people” would want to become full employees, according to the NYT.

The Department of Labor did not immediately respond to the DCNF’s request for comment.

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