Independent contractors may feel the impact of the new White House work rule

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The Biden administration will soon release a rule that could make it easier for workers to be considered “employees” instead of “independent contractors.”

The US Department of Labor has issued a notice of proposed regulation Tuesday, signaling plans to issue formal regulations that would redefine how employers classify their workers.

The employee tag includes protections for workers like a minimum hourly wage and overtime pay. Workers wrongly classified as contractors may be eligible for damages covering part of the arrears of these benefits. Employees are also entitled to unemployment benefits and workers’ compensation, for example.

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The Department of Labor would untie a Trump era to reign regarding independent contractors that went into effect in January 2021, shortly before President Biden took office. The agency would largely restore the previous status quo with some changes, experts said.

The misclassification of workers as independent contractors — also called freelancers or freelancers — instead of employees occurs in many industries, such as construction, healthcare, restaurants, retail, and transportation , Labor Department officials said Tuesday.

Employers can benefit financially by classifying their workforce as contractors instead of employees. For one thing, they don’t have to pay the payroll taxes that fund social security or unemployment insurance programs.

Overall, the proposal relaxes classification guidelines and would therefore likely result in more workers being considered employees rather than contractors, said Christopher Moran, partner at Troutman Pepper Hamilton Sanders, who specializes in labor and employment.

“I think Trump was narrowing it down a bit, and I think that [Biden rule] expands it a bit,” Moran said of the classification.

“I do not see them [rules] like a game changer,” he added. “The swings are not dramatic.

Guidelines as simple as ABC?

The action comes as many states have issued new guidelines – called “ABC” tests – which labor experts say make it easier for workers to be considered employees rather than contractors.

Ten states apply this test to wages and hourly benefits, although some only apply to workers in certain industries such as construction and landscaping, according at the Institute of Economic Policy.

In California, for example, where the ABC test was passed in 2019, a ballot measure exempted ride-share drivers and other gig workers for app-based companies like Uber and Lyft. These companies often classify gig workers as independent contractors.

“Millions of app-based workers choose this job because of the flexibility it offers,” said Kristin Sharp, CEO of the Flex Association. Members of the commercial group include DoorDash, Gopuff, Grubhub, HopSkipDrive, Instacart, Lyft, Shipt and Uber. “They overwhelmingly prefer to preserve their ability to choose when, where and how often they work.”

The new federal rules would not replace state rules, Moran said.

It is up to the company to look into the matter and say that these people are really employees.

Sally DworakFisher

senior lawyer at the National Labor Law Project,

“Today’s proposed rule takes a measured approach, essentially taking us back to the Obama era, during which our industry grew exponentially,” CR Wooters, head of federal affairs at Uber, said in a written statement. .

“We look forward to continuing a constructive dialogue with the administration and [Labor] secretary [Martin] Walsh as this process progresses,” Wooters added.

Federal action would be a particular boon for “vulnerable, low-wage workers,” Labor Department officials said.

“We discovered that the dishwashers were incorrectly classified as independent contractors in order to avoid paying them overtime to which they were otherwise entitled,” said Jessica Looman, senior assistant administrator of wages and hours at the company. agency, during a press call.

The rule is not yet defined and could take months to be finalized. The agency will seek public comment for 45 days from Thursday.

From a legal standpoint, the courts and the Department of Labor have long used an “economic reality” test for classifying jobs under the Fair Labor Standards Act. Independent contractors are not economically dependent on their employer for work and are in business for themselves.

Certain factors are used to assess this question, and generally applied consistently, the experts said. But Trump’s Labor Office rule set precedent for two “essential” factors. Among other things, the Biden rule would negate the added weight given to these two factors.

Department of Labor officials said the new rules would bring clarity to employers in the future, but experts said it was unclear whether employers would change the designations of their current workforce .

“I hope so,” said Sally Dworak-Fisher, senior attorney at the National Employment Law Project, of the reclassification. “But it’s up to the company whether they will look into this and say these people are really employees.”

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