The Labor Department's new independent contractor rule is set to take effect on March 11 and has already sparked controversy. The House Committee on Small Business has expressed concerns about the DOL's final rule, which effectively reverses a Trump-era measure on classifying independent contractors and reinstates the Obama-era ruling. This rule outlines a six-pronged approach to identifying gig workers, considering factors like a worker's ability to make a profit, their financial stake in an organization, their skill, the permanence of a job, the level of employer control, and the essential nature of the work.
Representative Roger Williams (R-TX), chair of the House Small Business Committee, has raised alarms about the rule, stating that it could endanger the status of over 22 million independent contractors and lead small businesses to hesitate in hiring them due to fears of increased misclassification lawsuits. The rule has been criticized for introducing a confusing multifactor analysis for determining worker classification.
The Labor Department's intention with this rule is to address the misclassification of employees and the exploitation of gig workers, who often experience lower pay, reduced benefits, and limited job security compared to full-time employees within the same company. Acting Secretary of Labor Julie Su emphasized the seriousness of misclassifying employees as independent contractors, stating that it deprives workers of basic rights and protections.
Several business groups, including the Coalition for Workforce Innovation and Associated Builders and Contractors, have taken legal action to block the rule. Additionally, the U.S. Chamber of Commerce is considering legal measures. This backlash reflects the ongoing debate surrounding the classification of gig workers.
The impact of the DOL's new rule is a matter of concern. Many companies currently utilizing gig workers may not immediately need to reclassify their workers. For example, DoorDash has expressed confidence that its workers, known as Dashers, are already properly classified and compliant with the new rule. However, the long-term effects of the ruling are uncertain. Peter Norlander, a Loyola University Chicago professor specializing in gig work, believes that the repercussions of this latest ruling may take time to unfold. He anticipates that test cases may arise in which workers argue for reclassification from independent contractors to employees, ultimately leaving the resolution of this issue undecided.