The US Department of Labor has proposed a new regulation that could make it harder for companies like Uber and Lyft to classify gig workers as independent contractors. Under the proposed rule, gig workers could gain new benefits and protections, including minimum wage and overtime.
The proposal reverses the Trump Administration’s rule that made it safer to classify gig workers as independent contractors. The DOL withdrew the regulation last year after President Joe Biden came into office, stating it was “in tension” with the Fair Labor Standards Act of 1938 — but until today, there’s been no clear replacement.
To determine whether a worker should be classified as an employee or independent contractor, the DOL now says it will use the “department’s approach with courts’ FLSA interpretation and the economic reality test,” which considers how long an individual has worked for an agency, their role at the company, and “opportunities for profit and loss,” among other factors.
“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” Secretary of Labor Marty Walsh said in a statement. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”
The rule isn’t set in stone just yet and, as The New York Times notes, will take months to be finalized. Even then, states will still be free to set their own rules on the matter. In 2020, Uber, Lyft, and DoorDash secured a victory with the passage of Prop 22, which exempts app-based delivery drivers and ride-hailing providers from employment status in California. In 2021, the California Superior Court ruled that the law was unconstitutional, although an industry group backed by Uber and Lyft has since appealed the decision.