Biden's impending independent contractor rule, set to go into effect on March 11, has ignited a heated debate well before its official implementation. The rule, designed to address the misclassification of employees and protect the rights of gig workers, is drawing criticism from various quarters.
The House Committee on Small Business expressed reservations about the Department of Labor's (DOL) final rule. The measure effectively reverses a Trump-era classification policy for independent contractors, reverting to the Obama-era ruling that outlines a comprehensive six-pronged approach to identify gig workers.
Chair of the House Small Business Committee, Representative Roger Williams (R-TX), asserted that the new rule could jeopardize the status of over 22 million independent contractors. In a letter to Acting Secretary of Labor Julie Su, Williams argued that the rule introduces a complex analysis that may deter small businesses from hiring gig workers, fearing an increase in misclassification lawsuits.
Six Factors for Classification Consideration
The independent contractor rule reinstates the long-standing multifactor analysis employed by courts, ensuring a comprehensive examination of relevant factors in determining a worker's classification as an employee or an independent contractor. The rule specifically focuses on six key factors that shape the analysis of a worker's relationship with their employer, encompassing:
1) Any opportunity for profit or loss a worker might have. 2) The financial stake and nature of any resources a worker has invested in the work. 3) The degree of permanence of the work relationship. 4) The degree of control an employer has over the person's work. 5) Whether the work the person does is essential to the employer's business. 6) A factor regarding the worker's skill and initiative.
"[T]his rule threatens the livelihood of many small-business owners by reimplementing a confusing multifactor analysis to determine whether a worker is an [independent contractor] or an employee," Williams wrote in the letter.
The regulation independently repeals the 2021 Independent Contractor Rule, as the department contends that it deviates from established legal principles and longstanding judicial precedent.
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DOL Aims to Combat Misclassification and Exploitation
Said rule was published in early January with the primary goal of combatting the misclassification of employees and the exploitation of gig workers. Gig workers often face lower pay, reduced or no benefits, and limited job security compared to their full-time counterparts within the same companies.
Acting Secretary of Labor Julie Su emphasized the importance of the rule, stating, "Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections."
Backlash and Legal Challenges
The rule is facing resistance from various business groups, including the Coalition for Workforce Innovation and Associated Builders and Contractors, both of whom have filed lawsuits to block its implementation. The U.S. Chamber of Commerce is also exploring legal action against the rule.
The ongoing debate over the classification of gig workers is not new. Companies like Uber and Lyft have previously faced lawsuits over the classification of their drivers as independent contractors rather than full-time employees.
With the March 11 implementation date approaching, questions remain about the rule's overall impact. While some companies, like DoorDash, express confidence in their current classification practices, the long-term effects are uncertain.
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