A move by the federal Department of Labor that makes it easier for businesses to classify their workers as independent contractors has been a boon for gig-economy businesses in the last weeks of the Trump administration.
The rule has no bearing on California, which has already set its own standards for classifying workers, and some gig establishments in the state have already ensured their ability to keep workers classified as contractors. President-elect Joe Biden, who has pledged to extend labor law protection to more workers, could try to challenge the federal government, experts said.
Under the final rule announced by the Labor Department on Wednesday, it will become more difficult for performance workers or others involved in contract work, such as truck drivers or contract nurses, to be considered employees under federal law and receive minimum wage and overtime. The rule takes effect on March 8.
Labor advocates said it would be a setback for workers’ protection. The rule has implications for millions of non-gig workers, including those who work as housekeepers, household cleaners and construction workers, potentially depriving them of the protection that comes with employee status, said Catherine Ruckelshaus, legal director and general counsel of the National . Labor law project.
Biden promised comprehensive policy changes that would extend the protection of workers and independent contracts. Ruckelshaus said she expects the government to be overthrown in the next government by Congress or by the Labor Department.
“We hope and expect it to be frozen or undone,” she said. “But it is by no means a completed agreement.”
The new administration may freeze the rule in the technical field, and set in motion a lengthy regulatory process to create a new set of rules, or to overthrow the rule by means of a congressional vote.
California, along with a handful of other states, has passed its own set of laws that determine the classification of workers. A ruling in the California Supreme Court in 2018, called Dynamex, set stricter standards under which workers can be treated as independent contractors rather than employees. The State Legislature then passed a comprehensive labor law codifying the ruling. Gig-economy enterprises vigorously fought the law before it came into force in early 2020.
Although the stricter standards of the law are in force, performance companies have won an exception with a proposal that was bankrolled by the giant giants Uber and Lyft, among others, which the voters approved in November. Proposal 22 enables those and other gig businesses to retain their workers as contractors, and provides a model for maintaining contractor status.
Gina Miller, a legal partner in Snell & Wilmer’s office in Orange County, said the federal government appears to be violating California law. Proposal 22, for example, requires companies to provide occupational accident insurance, even if they are still classified as contractors. According to the Labor Department rule, contract workers can receive compensation in various ways, such as through a health care grant.
“It enables businesses to give workers these quasi-benefits without worrying, it will undermine their classification,” Miller said.
The department of labor has lowered the standard for determining whether an employee should be classified as an employee versus a contractor. The test gives weight to the degree of control a worker has over their job, and their potential to make a profit or loss, but it no longer requires proof of other factors, she said.