The U.S. Department of Labor has passed a decision that would make it easier for “gig-economy” businesses to classify their workers as independent contractors, rather than employees who could claim legal benefits. The Trump administration today announced its final version of the rule and it will take effect on March 8, though that may change after President-elect Joe Biden takes office in January.
Last year, the DOL proposed a new framework for the classification of employees and contractors. It focuses on two ‘core factors’ to distinguish the two: the ‘nature and degree of control over the work’ and the ‘opportunity for profit or loss’ based on initiative and investment. It also contains a list of additional ‘guidelines’ that include ‘the amount of skills required’ for the job, the ‘degree of stability’ of the employment relationship, and whether the job is part of an ‘integrated production unit’ .
As The New York Times noted last year, the rule interprets existing regulations rather than enacting new regulations, and it only covers federal laws enforced by the DOL. States can still draft their own definitions, such as California’s Prop 22, which states that Lift and Uber drivers are not employees. However, it can still have a big impact on how companies define their employees. The non-profit labor law group National Employment Law Project calls it a ‘narrowing’ of the standards rather than a meaningful explanation.