A proposed Labor Department rule aims to change the standards for determining who is an independent contractor, or gig worker, making it easier for working people to be denied the benefits of full employment.
“This rule only serves to help unscrupulous employers at the expense of working people,” said International President Lonnie R. Stephenson. “And to do so at a time of such economic uncertainty is particularly egregious.”
The proposed rule, announced Sept. 22, sets a framework to determine whether someone is an independent contractor or a full-fledged employee. If they’re considered a contractor, companies don’t have to pay for protections like, health care, paid time off, overtime or a share of Social Security taxes, or contribute to unemployment insurance and provide workers' compensation.
The proposal is an interpretive rule, not a regulation with the force of law. But it could still have significant influence if it were finalized. And it’s a more employer-biased interpretation of employee status than what was applied during the Obama administration.
The proposed rule adopts an “economic reality” test for determining who qualifies as an independent contractor. The two main factors are that the worker must be in business for themselves and not economically dependent on the employer for work. It also factors in the degree of control someone has over their job and whether their earnings come from their initiative or by simply earning a wage.
If needed, the department said it would look at additional “guideposts” for clarification, like how much skill the work requires, and whether the relationship between the worker and company is permanent or temporary.
“It’s certainly a narrowing of the test,” Catherine Ruckelshaus, general counsel of the National Employment Law Project, told The New York Times. “Employers know the rules. Workers know the rules. Employers just don’t like where the lines are between employee and independent contractor. There really isn’t very much confusion.”
The proposal will be subject to a 30-day comment period once it’s published in the Federal Register.
Bloomberg Law noted that DOL leadership is making it a priority to finalize the regulation before the end of President Trump‘s term on Jan. 20, a timeline it called “unusually short for a rule that would have ramifications throughout the economy.”
“DOL brass and other administration officials consider the rulemaking as an opportunity to solidify Trump’s workplace policy legacy by responding to efforts certain Democratic-run states have made to widen the legal definition of an employee,” the article stated.
One of those states is California, which passed Assembly Bill 5 in 2019 with help from IBEW members and others in the labor movement. It applies a more rigid test for determining when a worker can be classified as an independent contractor. Companies including Uber, Lyft, DoorDash, Instacart and Postmates opposed the legislation and are backing an initiative in the Golden State, on the ballot this November, to exempt gig drivers – the backbone of their businesses.
The number of people considered gig workers or contractors has been growing over the last few decades, meaning more people are working without basic protections. The coronavirus pandemic has only exacerbated the shortcomings of such a system. In fact, gig and self-employed workers were deemed eligible, for the first time, for unemployment funds in the stimulus bill passed in March to deal with the surge of out-of-work Americans from the virus.
“The core problem is that for many years employers have been restructuring business models to shift risks to workers — risks for unemployment, risk for injury, risks for slowdowns,” said Jenny R. Yang, a senior fellow at the Urban Institute, and a former commissioner of the U.S. Equal Employment Opportunity Commission to the Washington Post. “Workers individually are not in a position to bear the risk. ... So this creates more uncertainty and ultimately threatens to further lower working conditions for more workers if it is finalized.”