The U.S. Department of Labor released a proposed rule this Tuesday, Oct. 11, that would impact how companies are able to classify workers as independent contractors. The rule would allow for millions of workers, such as gig drivers, home-care and construction workers to be classified as employees instead of independent contractors.
The proposed rule would institute a new test that the Labor Department will apply to determine how workers are classified as employees or contractors at a company. This test will consider several factors in its classification process including how much control workers have over how they do their job and how many opportunities a worker has to increase their earnings. If a worker does not meet the criteria for either of these factors, they will often be considered employees.
This proposed rule would lower the criteria previously instituted by the Trump administration labor department that a worker must meet in order to be classified as an employee. The former regulations stated that workers who owned their own businesses or had the ability to work for competing companies could be treated as contractors.
U.S. Labor Secretary Marty Walsh said in a statement that the proposed rule would help protect the rights of vulnerable workers, who he said are often misclassified as independent contractors by companies.
“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages,” Walsh said.
Experts predict that the proposed rule will significantly impact industries that rely on independent contractors such as gig working, delivery driving, home-care, construction, and maintenance workers. For instance, gig economy officials estimate that for companies like Uber and Lyft, classifying more workers as employees would cause labor costs to rise 20 to 30 percent.
An official timeline of the proposed bill has not yet been announced, but the rule will take at least several months to finalize.