On Tuesday, the Biden administration said it would take steps to redefine how the federal government distinguishes “employees” from “independent contractors,” a proposal that could, potentially, allow millions of so-called gig workers to demand workplace rights like a minimum wage and overtime pay.
The Department of Labor has issued a notice of rulemaking that aims to reverse guidelines approved in January 2021 while the agency was still under Republican control.
The department relies on certain guidelines to determine which workers it considers contractors by weighing two factors: how much control a worker has over when and how often they work, and how much they’re responsible for creating their own profits and investing in their own materials, labor, and equipment.
The Labor Department, which tried and failed to stop the rules from enacting after Biden’s inauguration, said in a 184-page proposal on Tuesday that after “further consideration,” it believes those guidelines do not “fully comport” with the text and purpose of the Fair Labor Standards Act.
Realigning the rules with labor laws and decades of legal precedence, the proposal says, requires equal consideration of other factors, such as whether the work being performed is “central or important to the employer’s business.”
The changes could prove a blow to companies whose workforces are primarily comprised of gig workers — those not currently entitled to paid sick leave or unemployment insurance, among other benefits.
The companies — Uber, Lyft, and Instacart, among others — have long opposed efforts to reclassify their contractors, collectively contributing hundreds of millions two years ago to help pass California’s Proposition 22, a ballot initiative exempting app-based delivery services from providing benefits to workers.
“The ultimate inquiry is whether, as a matter of economic reality, the worker is either economically dependent on the employer for work (and is thus an employee) or is in business for themself (and is thus an independent contractor),” the department said.