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The Trump administration made it easier for companies to classify workers as independent contractors, a victory for small economy businesses such as food delivery and rideshare services and opposition to a California law that did the opposite.
The Labor Department, in a final rule released Wednesday, would make it harder for a construction worker, such as an Uber or DoorDash driver, to be counted as an employee under federal law. This means that these workers would not be covered by federal minimum wage and overtime laws, and they could be responsible for paying the employer’s portion of Social Security taxes.
The rule will not come into effect until March 8, following the inauguration of President-elect Joe Biden on January 20. The Biden administration could seek to delay implementation of the rule, issue new enforcement guidelines, or seek to draft a new version of the rule. . The Biden administration could also choose not to defend the settlement in the event of a legal challenge. A spokeswoman for Mr. Biden declined to comment.
Flexible working is overwhelmingly preferred by those who choose to earn on gig-economy platforms such as Uber, Danielle Burr, Uber Technologies Inc. of
head of federal affairs said Wednesday.
“Forcing a binary choice on workers – either being an employee with more benefits but with less flexibility, or an independent contractor with limited protections – is obsolete,” she said, noting that Uber has offered additional benefits to drivers. “We appreciate the efforts being made to modernize the laws of our country.”
The Department of Labor’s action follows a 2019 California law that required companies to reclassify many contract and current workers as employees, giving those workers access to the state’s minimum wage and laws on overtime, workers’ compensation coverage and paid sick days. In November, California voters approved a proposed vote that exempted Uber, Lyft Inc.,
DoorDash Inc. and similar law firms, which reportedly reshaped their business model.
DoorDash said the food delivery company is committed to ensuring its workers can maintain flexible income opportunities. The vast majority work less than 10 hours per week, or an average of four hours per week or less. “We look forward to continuing to work with lawmakers from all political walks of life at the state and federal levels,” said a spokesperson for DoorDash.
The rule “respects the centuries-old American tradition of being your own boss,” Assistant Secretary of Labor Patrick Pizzella said. He said California law had skewed the definition of an independent contractor and added that the new federal rule would increase opportunities for on-demand workers and give them greater control over their lives.
A separate Department of Labor official said states are not required to follow the federal rule, but the department hopes the rule can be a model for states.
“There will be efforts in several states to pass laws on which the Department of Labor rule will be the basis,” said Michael J. Lotito, co-chair of the Littler Mendelson law firm PC’s Workplace Policy Institute and lawyer who represents businesses. Other states have used aspects of California laws as a model.
For a growing number of Americans, a patchwork of concerts is the norm, while others have become so-called freelancers because they take on a second job through digital platforms like Uber or Etsy to make ends meet. . But almost all of them face the challenges of inconsistent income and access to benefits. (Originally published March 22, 2018)
Unions, taxi drivers and worker advocates were among those who wrote letters protesting the plan, saying employees often have access to benefits, including health insurance and pensions, that independent contractors don’t.
“The rule allows employers to call most of their workers independent contractors,” said Catherine Ruckelshaus, general counsel at the National Employment Law Project, which advocates for low-wage workers. “This would dramatically reduce protection for workers … in jobs that particularly need it, including jobs in construction, agriculture, housekeeping and delivery.”
Ms Ruckelshaus said the NELP was ready to challenge the rule in court, but added that this might not be necessary, depending on the actions of the Biden administration.
Business groups, including the Chamber of Commerce, Builders and Associate Entrepreneurs and the National Federation of Independent Businesses, have also supported the rule, which they say further clarifies labor laws passed in the 1930s.
—Sarah E. Needleman contributed to this article.
Write to Eric Morath at [email protected]
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