The Labor Department said it would revisit rules that designate whether workers are classified as employees or independent contractors, a move that could affect millions of gig and contract workers in healthcare, restaurants, ride-share transportation and many other industries.
The department released a rule proposal Tuesday that would change how labor laws define independent contractors. The new rule, if approved, would rely on a “multifactor economic reality test” to determine whether a worker is truly in business by themselves and controls aspects of their employment like whether they perform managerial duties, how they are supervised and whether they are able to set prices.
Ride-share stocks, including
Uber Technologies Inc.
and
Lyft Inc.,
declined sharply following the news.
The new rule would replace a Trump-era rule—finalized just days before the Biden administration took office—and return to an approach favored by the Obama administration. The Trump administration rule made it more difficult for a gig worker, such as an Uber or
DoorDash
driver, to be counted as an employee under federal law. The Biden administration changes would make it easier for those workers to be covered by federal minimum-wage and overtime laws.
“The 2021 Independent Contractor Rule is out of sync with what the courts have been saying for decades,” said Solicitor of Labor
Seema Nanda,
a senior department official.
The 2021 rule was blocked by the Biden administration within months of taking office, but a federal judge later reinstated it.
Gig-economy companies were among the most vocal proponents of the Trump-era rule, seeking to cement drivers and similar workers as contractors after California’s legislature passed a law requiring the companies to reclassify their drivers as employees eligible for broad employment benefits.
In the 2020 election, voters in California exempted many ride-sharing and delivery services from the state law, following the most expensive campaign for any ballot measure in state history.
An Uber representative said drivers overwhelmingly prefer the flexibility that comes with being an independent contractor.
“In a time of deep economic uncertainty, it’s crucial that the Biden administration continues to hear from the more than 50 million people who have found an earning opportunity with companies like ours,” said Uber’s head of federal affairs, CR Wooters. He said the company looks forward to continued talks with the administration.
Lyft, in a blog post, said the proposal is the first step in what is likely to be a longer process before any final rule or determination is made. “Lyft will continue to advocate for laws like the one in Washington state which gives workers what they want: independence plus benefits and protections,” the post said.
Biden administration officials said that workers will still be able to work as much or as little as they want under their proposed rule. Trump administration officials had said their rule made it easier for Americans to be self-employed and set their own hours, and some corporate opponents of a more stringent standard have argued that it is unrealistic to extend employee-like benefits to workers who were on the clock for just a few hours a week.
—Sarah E. Needleman contributed to this article.
Write to Gabriel T. Rubin at [email protected]
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