New Department of Labor rule could reclassify countless gig workers as employees

The US Department of Labor (DOL) published a final rule to the Federal Register on Wednesday that would increase the difficulty of classifying workers as independent contractors. If the rule survives court challenges unscathed, it will replace a business-friendly Trump-era regulation that did the opposite. It’s scheduled to go into effect on March 11.

The new rule, first proposed in 2022, could have profound implications for companies like Uber and DoorDash that rely heavily on gig workers. It would mandate that workers who are “economically dependent” on a company be considered employees.

The rule restores a pre-Trump precedent of using six factors to determine workers’ classification. These include their opportunity for profit or loss, the financial stake and nature of resources the worker has invested in the work, the work relationship’s permanence, the employer’s degree of control over the person’s work, how essential the person’s work is to the employer’s business and the worker’s skill and initiative.

In its decision to publish the new guidance, the DOL cites a “longstanding precedent” in the courts predating the Trump administration’s hard right turn. “A century of labor protections for working people is premised on the employer-employee relationship,” Acting Labor Secretary Julie Su said in a press call with Bloomberg.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” Su wrote in the announcement post. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

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If the rule takes effect, it’s expected to increase employer costs. The US Chamber of Commerce, a non-government lobby for business interests, unsurprisingly opposes it. “It is likely to threaten the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy,” Marc Freedman, VP of the US Chamber of Commerce, said in a statement to Reuters.

DoorDash sounds optimistic that the rule wouldn’t apply to its workforce. “We are confident that Dashers are properly classified as independent contractors under the FLSA, and we do not anticipate this rule causing changes to our business,” the company wrote in a statement. “We will continue to engage with the Department of Labor, Congress, and other stakeholders to find solutions that ensure Dashers maintain their flexibility while gaining access to new benefits and protections.”

Groups with similar views are expected to mount legal challenges to the rule before it goes into effect. A previous attempt by the Biden Administration to void the Trump-era rules met such a fate when a federal judge blocked the DOL’s reversal.

Although the most prominent theoretical applications of the rule would be with gig economy apps like DoorDash, Lyft and Uber, it could stretch to sectors including healthcare, trucking and construction. “The department is seeing misclassifications in places it hasn’t seen it before,” Wage and Hour Division Administrator Jessica Looma said to Bloomberg on Monday. “Health care, construction, janitorial, and even restaurant workers who are often living paycheck to paycheck are some of the most vulnerable workers.”

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