Employees or independent contractors? DOL publishes final rule

Washington — The Department of Labor has issued a final rule that targets “employee misclassification” of workers as independent contractors. 

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” acting Labor Secretary Julie Su said in a press release.

Critics of the rule, however, claim it would rob workers of the flexibility they want.

The final rule replaces the Wage and Hour Division’s analysis for determining if a worker is an employee or an independent contractor under the Fair Labor Standards Act of 1938. DOL contends the rule is “more consistent with judicial precedent and the act’s text and purpose,” as opposed to a 2021 final rule. 

The new rule uses six factors to guide WHD’s analysis, including:

• A worker’s opportunity for profit or loss.
• A worker’s financial stake and the nature of any resources they’ve invested in the job.
• The permanence of the employer-worker relationship.
• The amount of control an employer exerts over a worker.
• How essential the worker is to the business.

An additional factor is the worker’s skill and initiative. Su says the rule “will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

Sen. Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor and Pensions Committee, said he intends to introduce a Congressional Review Act resolution to repeal the rule. 

Cassidy notes in a press release that when Su was California’s labor secretary, the state implemented a similar measure.

“In California, A.B. 5 was so unpopular that 59% of California voters supported a measure to exempt ride-share drivers from the enforcement of the legislation. Additionally, the governor and state legislature had to pass multiple laws to exempt over 100 occupations.” 

Rep. Virginia Foxx (R-NC), chair of the House Education and the Workforce Committee, and Rep. Kevin Kiley (R-CA), chair of the House Workforce Protections Subcommittee, also voiced their opposition in a joint statement Jan. 9.

“The modern economy is rapidly changing, and America’s workforce requires flexibility to thrive,” they write. “The DOL’s rule is the polar opposite of flexibility. The livelihoods of independent contractors, app-based workers, freelancers and self-employed individuals will be completely destroyed. Working Americans should have the flexibility to earn a living as they see fit.”

The rule is set to go into effect March 11.