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‘Gagging On The Gig Economy’ - U.S. Labor Department ‘Fast-Tracks Rule Widening’ Independent-Contractor Status

Published Thursday, September 24, 2020
by Steve Wishnia/
‘Gagging On The Gig Economy’ - U.S. Labor Department ‘Fast-Tracks Rule Widening’ Independent-Contractor Status

(WASHINGTON, D.C.) - The U.S. Labor Department has proposed a rule intended to make it easier for employers to classify Workers as Independent Contractors and is fast-tracking it so it could be finalized before the next President takes office.

The proposed rule, announced on Tuesday (September 22nd), would widen when Workers can be considered an Independent Contractor instead of an Employee.

Independent Contractors don’t have to be paid Minimum Wage or overtime and are not eligible for Unemployment Benefits (except temporarily through the Pandemic Unemployment Assistance Program, scheduled to expire in December) or Workers’ Compensation.

“The rule generally ‘reads like it was written by an attorney for Uber or one of the App-based companies,’” Catherine Ruckelshaus, Legal Director for the National Employment Law Project (NELP), told LaborPress.

The rule would rely on two “core factors” to determine whether a Worker is “economically dependent on someone else’s business or is in business for himself or herself:” How much control they have over their work and whether they have an “opportunity for profit or loss based on initiative and/or investment,” the Labor Department said.

If those two factors aren’t conclusive, it would consider three “guideposts:” The amount of skill required for the work; How permanent the relationship between the Worker and the employer is; and Whether the work is part of an “integrated unit of production.”

“The Department’s proposal aims to bring clarity and consistency to the determination of who’s an Independent Contractor under the Fair Labor Standards Act,” Secretary of Labor Eugene Scalia said in a statement. “Once finalized, it will make it easier to identify Employees covered by the Act, while respecting the decision other Workers make to pursue the freedom and entrepreneurialism associated with being an Independent Contractor.” 

NELP said the proposal would “make it easier for corporations to cheat their Workers and avoid Minimum Wage and overtime protections.”

“This ‘is yet another example’ of the Trump Administration’s relentless push to stack the deck against Workers at every turn,” NELP Executive Director Rebecca Dixon said in a statement.

“This proposed rule ignores the clear language of the Fair Labor Standards Act and decades of court rulings, including by the U.S. Supreme Court.  Companies that require their Workers who are not running their own businesses to operate as ‘Independent Contractors’ in order to get a job should not get a free pass on illegally misclassifying Workers, but the DOL has just offered them one,” Dixon said.

The Labor Department’s “core factors” standard contrasts with the “ABC test” used by California’s Assembly Bill 5, enacted last September, and similar laws in Massachusetts, New Jersey, and Connecticut.

The Protecting the Right to Organize Act, passed by the House in February, would set a similar standard nationally, but has gone nowhere in the Senate.

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