The Labor Department said it would revisit rules that designate whether workers are classified as employees or independent contractors, a move that could affect millions of gig and contract workers in healthcare, restaurants, ride-share transportation and many other industries.
The department released a rule proposal Tuesday that would change how labor laws define independent contractors. The new rule, if approved, would rely on a “multifactor economic reality test” to determine whether a worker is truly in business by themselves and controls aspects of their employment like whether they perform managerial duties, how they are supervised and whether they are able to set prices.
Ride-share stocks, including
Uber Technologies Inc.
declined sharply following the news.
The new rule would replace a Trump-era rule—finalized just days before the Biden administration took office—and return to an approach favored by the Obama administration. The Trump administration rule made it more difficult for a gig worker, such as an Uber or
driver, to be counted as an employee under federal law. The Biden administration changes would make it easier for those workers to be covered by federal minimum-wage and overtime laws.
“The 2021 Independent Contractor Rule is out of sync with what the courts have been saying for decades,” said Solicitor of Labor
a senior department official.
The 2021 rule was blocked by the Biden administration within months of taking office, but a federal judge later reinstated it.
Gig-economy companies were among the most vocal proponents of the Trump-era rule, seeking to cement drivers and similar workers as contractors after California’s legislature passed a law requiring the companies to reclassify their drivers as employees eligible for broad employment benefits.
In the 2020 election, voters in California exempted many ride-sharing and delivery services from the state law, following the most expensive campaign for any ballot measure in state history.
Biden administration officials said that workers will still be able to work as much or as little as they want under their proposed rule. Trump administration officials had said their rule made it easier for Americans to be self-employed and set their own hours, and some corporate opponents of a more stringent standard have argued that it is unrealistic to extend employee-like benefits to workers who were on the clock for just a few hours a week.
Write to Gabriel T. Rubin at [email protected]
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