A Federal Department of Labor measure that will make it easier for companies to classify their workers as self-employed contractors offers an advantage for giant economy companies in the final weeks of the Trump administration.
The rule has nothing to do with California, which has already established its own standards for classifying workers, and some concert companies in the state have already guaranteed their ability to keep workers classified as hired. President-elect Joe Biden, who has promised to extend protection of the labor law to more workers, may try to defy the federal rule, experts said.
According to the final rule released on Wednesday by the Department of Labor, it will be more difficult for street workers or others involved in hired work, such as truck drivers or hired nurses, to be considered employees under federal law and receive minimum wages and overtime. The rule is set to take effect on March 8.
Labor advocates said there would be a setback in worker protections. The rule has implications for millions of people other than concert workers, including people in jobs who work as janitors, janitors and construction workers, potentially removing the protections that come with employee status, said Catherine Ruckelshaus, legal director and general counsel for the National Labor Bill.
Biden promised radical policy changes that would expand protections for independent workers and contracts. Ruckelshaus said he hoped the rule would be overturned by Congress or the Department of Labor in the next government.
“We expect it to be frozen or scrapped,” she said. “But it is not a closed deal at all.”
The new government could freeze the rule on a technicality and set in motion a lengthy regulatory process to create a new set of rules or overturn the rule through a vote in Congress.
California, along with a handful of other states, has passed its own set of laws that govern the classification of workers. A California Supreme Court ruling in 2018, called Dynamex, set stricter standards under which workers can be treated as independent contractors rather than employees. The state legislature then passed a comprehensive labor law that codified that decision. Giant economy companies fought vigorously against the law before it went into effect in early 2020.
While the law’s stricter standards remain in effect, concert companies have won a carve-out with a proposal funded by giants Uber and Lyft, among others, which voters approved in November. Proposition 22 allows these and other labor companies to continue treating their workers as contractors, offering a model for preserving contractor status.
Gina Miller, a legal partner in the Snell & Wilmer office in Orange County, said the federal rule appears to have been inspired by California law. For example, Proposition 22 requires companies to provide workers with accident insurance, even if they continue to be classified as hired. The Department of Labor rule allows contract workers to receive compensation in alternative ways, such as through a health stipend.
“This allows companies to offer workers these quasi-benefits without worrying that it will damage their ranking,” said Miller.
The Department of Labor has basically lowered the level of how it determines whether a worker should be classified as an employee or contracted. The test assesses the degree of control a worker has over his job and his potential for profit or loss, but it no longer requires proof of other factors, she said.