The Department of Labor on Tuesday announced a final rule forcing companies to treat some workers as employees rather than cheaper independent contractors, a move that has infuriated business groups and sparked legal challenges. Probability is high.
The rule is widely expected to increase labor costs in industries that rely on contract workers and freelancers, including trucking, manufacturing, health care and app-based “gig” services.
Most federal and state labor laws, such as minimum wage and overtime pay requirements, apply only to a company's employees.
Research shows that employees pay companies up to 30% more than independent contractors.
The rules require workers to be considered employees rather than contractors if they are “economically dependent” on the company.
This falls short of wage laws in California and other states, which impose even greater restrictions on independent contracting.
Business groups and Republican lawmakers on Tuesday sharply criticized the rule, saying it would cost millions of workers the opportunity to earn money and could cause chaos and lead to costly lawsuits.
Republican Sen. Bill Cassidy of Louisiana said in a statement that he would introduce a resolution to repeal the rule.
Cassidy said the rule would strengthen union efforts to increase membership, since independent contractors and freelancers cannot join unions.
The rules replace regulations from former President Donald Trump's administration that made it easier to classify workers as independent contractors.
The new rules are likely to be challenged in court by industry groups and companies.
Under Trump-era rules, workers who owned their own businesses or were able to work for competing companies, such as drivers who work for both Uber Technologies and Lyft, could be treated as contractors. .
The new rules are scheduled to come into effect on March 11th.
Acting Labor Secretary Julie Su said in a call with reporters on Monday that misclassifying workers as contractors rather than employees is the most effective way to ensure that workers benefit most from legal protections such as minimum wage and unemployment insurance. He said it would have a particularly negative impact on low-income workers.
“A century of labor protections for working people is premised on the employer-employee relationship,” Hsu said.
Labor advocates and some Democratic leaders praised the rule, saying it was necessary to ensure basic protections for workers.
“Worker misclassification forces law-abiding companies to compete with unscrupulous employers who use misclassification to unfairly reduce labor costs,” Rep. Bobby Scott, D-Virginia, said in a statement. It also leads to the weakening of the
But some business groups say the rules lean too far toward treating workers as employees rather than contractors, depriving millions of workers of flexibility and opportunity. That's what it means.
“What's worse, this rule is completely unnecessary as the department continues to report success in cracking down on bad actors who misclassify workers,” Mark Friedman, vice president of the U.S. Chamber of Commerce, said in a statement. ” he said. He added that the Chamber of Commerce, the nation's largest business group, is considering challenging the rule in court.
Potential impact on “gig workers”
The Labor Department said the rule was designed to crack down on industries where workers are frequently misclassified, such as construction and health care.
But the potential impact on app-based delivery and ride-hailing services, whose business models rely on contracted “gig” labor, has garnered the most attention.
The Chamber for Progress, a trade group representing tech companies, said the rule could affect gig workers depending on the Labor Department's enforcement.
The group says reclassifying independent contractors as company employees would negatively impact an estimated 3.4 million gig workers and result in $31 billion in lost revenue.
Companies like Uber and Lyft have expressed concerns about the rule, but also said they don't expect the rule to classify their drivers as employees.
CR Wooters, Uber's head of federal affairs, said in a statement that the new rules “do not materially change the laws under which we operate.”
“Drivers across the country have made it overwhelmingly clear in comments about this rule and in survey after survey that they do not want to lose the unique independence they enjoy,” Wouters said. said.
Lyft and DoorDash also said in separate statements that they do not expect the rule to change the way they do business.
“The vast majority of dashers already have a full-time or part-time job, or are primary caregivers, students, self-employed, or retired. I’m not asking for it,” DoorDash said.
To determine whether a worker should be classified, the Department of Labor considers the worker's opportunity for profit or loss, the degree of control the company has over the worker, and whether the work is an integral part of the company's operations. He said he would consider factors such as whether or not. As an employee or contractor.
Business groups claim that the long list of factors that may determine a worker's classification has led to confusion and inconsistent results, resulting in costly class action lawsuits that have resulted in workers being misclassified. It is said that there is a possibility of spurring
