Those criteria also include the degree of permanence of the relationship between a worker and the employer and the amount of skill required for the job. The new rule directs employers to consider the totality of five criteria traditionally used to determine whether a worker is an independent contractor, without predetermining whether one outweighs the other. The Trump-era rule had narrowed that criteria to whether the work is part of an integrated unit of production, and gave more weight to two other considerations: the degree of control by the employer over the worker and the worker’s opportunity make a profit profit or loss. One key change that could affect app-based companies is a requirement that employers consider whether the employee’s work is an integral part of their business. The Labor Department argued that the Trump administration rule did not comport with the 1938 Fair Labor Standards Act and decades of case law applying it. “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,” said Secretary of Labor Marty Walsh in a prepared statement.
WATCH: New documents reveal how far Uber executives were willing to go to grow their business Misclassifying workers as independent contractors denies those workers protections under federal labor standards, promotes wage theft, allows certain employers to gain an unfair advantage over businesses, and hurts the economy, the Labor Department.
Shares of of the ride-hailing companies Lyft and Uber tumbled about 8 percent, although both companies dismissed the significance of the new proposal and its potential to affect their business. The reaction in markets for major gig companies was immediate. Department of Labor regulations would replace a Trump-era rule that lowered the bar for classifying employees as contractors, workers who are not covered by federal minimum wage laws and are not entitled to benefits including health insurance and paid sick days.
The Biden administration published a new proposal Tuesday regarding how workers should be classified, saying that thousands of people have been incorrectly labeled as contractors rather than employees, potentially curtailing access to benefits and protections they rightfully deserve.
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