US Department of Labor proposes restructuring of gig worker status • The Register

The U.S. Department of Labor signaled today that it hopes to make it much harder for companies to argue that gig workers and laborers, among others, are individual contractors and not employees.

As outlined in a notice of proposed rulemaking [PDF]The Biden administration intends to adjust the criteria used to determine how workers are classified under US labor law.

Although employees enjoy various prescribed benefits, independent contractors do not. It’s no surprise, then, that Big Tech prefers to classify its armies of gig workers — those who take paid work off apps — as non-employees.

News of the proposal sent shares of Uber and Lyft, which rely on gig workers, down about 10 percent. The changes proposed by the Department of Labor, which will only go ahead after a public comment period, affect laws relevant to the Department of Labor such as: B. the federal minimum wage.

“While independent contractors play an important role in our economy, we have seen in many cases employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” Labor Secretary Marty Walsh said in a statement.

“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

Incorrect classification deprives workers of their federal labor protection

Current regulations specify two core criteria for determining how a worker is classified: the company’s control over the worker; and the worker’s ability to benefit or not as a result of individual initiative.

This week’s proposal is more complicated than the ABC test adopted by California and Massachusetts: Is the work under the company’s control; is the work that is central to the company’s business; and does the person work in the same trade as the company?

Instead, the Labor Department’s update calls for “an analysis of the totality of economic reality test circumstances, in which factors have no predetermined weight and are considered in terms of the economic reality of the entire activity.” And it would look at investment as a factor in its own right, worker control and the extent to which the worker’s activity is an integral part of the company’s business.

With more factors to consider, a gig worker is more likely to be classified as an employee under the proposed rules, especially as the U.S. Federal Trade Commission signals it intends to pay more attention to worker classification.

The DOL says that having multiple “gig jobs” alone should not be used as a factor in the worker being in a contractual relationship

“First, this new rule retires the 2021 independent contractor rule, which was more favorable to independent contractor status,” said Liya Palagashvili, a senior research fellow at George Mason University’s Mercatus Center, in an email to The registry.

“However, in addition to revoking this rule, the DOL provides additional rules that would make it more difficult for workers to be classified as independent contractors, particularly gig economy workers.

“In the six-factor test that DOL uses, for example, to assess whether a worker is an independent contractor, they will now consider ‘additional aspects of control’ such as ‘relying on a technology to manage a workforce ‘monitoring’, meaning when companies are tracking an employee’s location and even generating automatic reminders, it can mean that the employee is being ‘supervised’ and therefore looking more like an employee.”

“Additionally, under the control factor, the DOL added that if a worker has multiple low-paying jobs for which he is dependent on work for a living, that would be indicative of an employment relationship,” Palagashvili added. “As such, DOL says that having multiple ‘gig jobs’ (as many workers often do) alone should not be used as a factor in determining that the worker is in a contractor relationship.”

In conjunction with the Labor Department’s rule proposal, Uber stock fell about 10 percent on Tuesday, while Lyft stock fell about 12 percent. Meanwhile, the DJIA, S&P 500, and NASDAQ Composite were all up or flat.

Companies like Uber and Lyft have built significant business by insisting that drivers who interact with their ridership acquisition, routing, and payment software are independent contractors, not employees. As a result, gig economy companies have lower labor costs because they don’t have to pay benefits and taxes to workers.

Uber, Postmates and two company drivers are currently trying to get the US Ninth Circuit Court of Appeals to reverse California’s work classification rules (Lydia Olson, et al. v. the State of California, et al).

Business-oriented groups are predictably siding with companies that rely on gig workers and resisting efforts to redefine employment status.

“Gig workers who prefer flexibility over being forced to become clerks would mean a serious loss of jobs and income for millions of Americans,” Adam Kovacevich, CEO of the Chamber of Progress, said in a statement.

The Chamber of Progress, a trade group, released a study predicting that the introduction of stricter rules would mean 3.2 million out of 4.44 million newly classified contractors would lose their part-time or full-time jobs, resulting in a net loss of profits of equivalent to US$35.2 billion.

A study released in June by the Economic Policy Institute, a progressive think tank, found: “About 1 in 7 gig workers (14 percent) earn less than the federal hourly minimum wage and more than a quarter (29 percent) earn less than the state minimum wage Minimum wage.”

Palagashvili argues that most independent contractors will not benefit from the proposed rule as they will supplement their full-time employment with independent work. She cites a 2019 research paper [PDF] which states: “The largest proportion of workers with IC incomes are those in the upper income quartile who primarily receive wage income.”

From a workers’ rights perspective and clarity in the workplace, this appears to be a very positive step

Wendy Musell, managing partner at the law firm of Wendy Musell and legal counsel at employment law specialist Levy Vinick Burrell Hyams LLP, said The registry In a telephone interview, she welcomed the switch to the “Totality-of-the-summs” test because it “rather corresponds to the realities of the workplace”.

The earlier rule, she said, only focused on certain factors and raised problems in labor disputes because it deviated from decades of precedent in previous court decisions that relied on a more nuanced analysis of worker classification.

“From a workers’ rights perspective and clarity in the workplace, this appears to be a very positive move,” she said.

Musell added that workers’ rights advocates have criticized the previous government’s rules for allowing workers to be misclassified. When that happens, she said, it’s the taxpayers who end up paying for the benefits, like health care, that employers don’t provide.

Palagashvili said the new rule was not related to healthcare and suggested that perhaps it should be. “One thing that would be beneficial for independent contractors is if the DOL said companies could provide healthcare to their independent contractors without the risk of those people being considered employees,” she said. ® US Department of Labor proposes restructuring of gig worker status • The Register

Rick Schindler

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