The Trump administration has made it easier for companies to classify workers as independent contractors, a victory for gigantic economy companies such as food delivery and ride-sharing services, and opposition to a California law that did the opposite.
The Labor Department in a final rule released on Wednesday would make it more difficult for a show worker, such as an Uber or DoorDash driver, to be counted as an employee under federal law. This means that these workers would not be covered by federal minimum wage and overtime laws and could be responsible for paying the employer’s share of Social Security taxes.
The rule will not take effect until March 8, after President-elect Joe Biden takes office on January 20. The Biden government may try to delay implementation of the rule, provide new guidelines for applying the rule or try to write a new version of the rule. The Biden government can also choose not to defend the regulation if it is challenged in court. A Biden spokeswoman declined to comment.
Flexible working is overwhelmingly preferred by those who choose to win on gigantic economy platforms such as Uber, Danielle Burr, Uber Technologies Inc.’s
head of federal affairs, said Wednesday.
“Forcing a binary choice on workers – being an employee with more benefits but less flexibility, or an independent contractor with limited protections – is out of date,” she said, noting that Uber offered additional benefits to drivers. “We appreciate the efforts made to modernize our nation’s laws.”
The Department of Labor action follows a California law of 2019 that required companies to reclassify many contracted and temporary workers as employees, giving these workers access to the state’s minimum wage and overtime laws, workers’ compensation coverage and sick days paid. In November, California voters approved a voting proposal that exempted Uber, Lyft Inc.,
DoorDash Inc. and similar law firms, which would have overhauled its business model.
DoorDash said the food delivery company is committed to ensuring that its employees can maintain flexible earnings opportunities. The vast majority work less than 10 hours a week, or an average of four hours a week or less. “We are looking forward to continuing to work with lawmakers across the political spectrum at the state and federal levels,” said a DoorDash spokesman.
The rule “respects the time-honored American tradition of being your own boss,” said Deputy Labor Secretary Patrick Pizzella. He said California law distorted the definition of an independent contractor and added that the new federal rule would increase opportunities for concert workers, and give them greater control over their lives.
A separate Labor Department official said that states are not required to follow the federal rule, but the department hopes that the rule can be a model for states.
“There will be efforts in several states to pass laws on which the Department of Labor rule will be the basis,” said Michael J. Lotito, co-chairman of the Littler Mendelson PC law firm’s Workplace Policy Institute and a lawyer representing companies. Other states used aspects of California law as a model.
For an increasing number of Americans, a patchwork of show work is the norm, while others have become so-called self-employed because they take a second job through digital platforms like Uber or Etsy to survive. But almost everyone faces the challenges of inconsistent income and access to benefits. (Originally published on March 22, 2018)
Labor unions, taxi drivers and worker advocates were among those who wrote letters protesting the plan, saying employees often have access to benefits, including health insurance and retirement plans, that independent contractors do not.
“The rule gives employers permission to call most of their workers independent contractors,” said Catherine Ruckelshaus, general counsel for the National Employment Law Project, which defends low-wage workers. “This would dramatically reduce protections for workers … in jobs that particularly need them, including construction, agriculture, janitorial and delivery.”
Ms. Ruckelshaus said the NELP is ready to challenge the rule in court, but added that this may not be necessary, depending on the actions of the Biden government.
Business groups, including the Chamber of Commerce, Builders and Associated Contractors and the National Federation of Independent Companies, also supported the rule, which they said would give greater clarity to a labor law passed in the 1930s.
—Sarah E. Needleman contributed to this article.
Write to Eric Morath at [email protected]
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