The Labor Department on Tuesday unveiled a proposal that would make it more likely for millions of janitors, home-care and construction workers and gig drivers to be classified as employees rather than independent contractors.
Companies are required to provide certain benefits and protections to employees but not to contractors, such as paying a minimum wage, overtime, a portion of a worker’s Social Security taxes and contributions to unemployment insurance.
The proposed rule is essentially a test that the Labor Department will apply to determine whether workers are contractors or employees for companies. The test considers factors such as how much control workers have over how they do their jobs and how much opportunity they have to increase their earnings by doing things like offering new services. Workers who have little of either are often considered employees.
The new version of the test lowers the bar for that employee classification from the current test, which the Trump administration’s Labor Department created.
The proposal is intended as a so-called interpretive rule that doesn’t have the legal force of a regulation specifically authorized by Congress, and it applies only to laws that the department enforces, such as the federal minimum wage. States and other federal agencies, like the Internal Revenue Service, set their own criteria for employment status, and the rule would not directly affect what they decided about the status of gig workers.
But many employers and regulators in other jurisdictions are likely to consider the department’s interpretation when making decisions about worker classification, and many judges are likely to use it as a guide.
As a result, the proposal is a potential blow to gig companies and other service providers that argue their workers are contractors, though it would not immediately affect the status of those workers. [Continue reading…]