House committee approves resolution to repeal DOL rule targeting worker misclassification

Washington — The House Education and the Workforce Committee has advanced a resolution aimed at repealing the Department of Labor’s rule on determining if a worker is an employee or an independent contractor.

The Congressional Review Act resolution (H.J. Res. 116), approved 21-13 on March 21, now goes before the full House for consideration. However, it likely won’t get past the Democrat-controlled Senate.

The rule, which went into effect March 11, replaced 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.

The other factor is the worker’s skill and initiative. Acting Labor Secretary Julie Su said 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.”

During her opening statement March 21, Rep. Virginia Foxx (R-NC), who chairs the committee, said the rule “threatens to eliminate the livelihoods of tens of millions of independent contractors across the country.”

She continued: “Independent contracting is the preferred model for so many because it affords workers the flexibility to control their own careers and work-life balance. It is imperative that the committee stands as a bulwark against the DOL’s independent contractor overreach.”

Rep. Bobby Scott (D-VA), the committee’s ranking member, pointed out that workers aren’t the only ones who suffer – losing out on protections and income – when they’re misclassified.

“For decades, unscrupulous employers have used misclassification as a strategy to cut down on labor costs and exploit both insufficient penalties and the limited capacity of underfunded enforcement agencies,” Scott said. “There are, in fact, as many as 10%-30% of employers currently misclassifying their employees.

“Those unscrupulous employers who misclassify workers can save about 30% in labor costs and gain an unfair competitive advantage over employers who play by the rules. They have less incentive to invest in training their workforce to be safer and more efficient.”