The Controversial Independent Contractor Rule Finalized

The U.S. Department of Labor has issued the final rule on the definition of an independent contractor. The very controversial rule was first proposed in October of 2022 and has been more than one year in the making.

Set under the Fair Labor Standards Act (FLSA), the rule looks to “combat” the misclassification of employees. Acting Secretary of Labor Julie Su said it’s a misclassification that could lead to minimum wage issues, overtime pay and other benefit issues.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” Lu said. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

The rule goes into effect on March 11th.

To say the least, it is opposed by some very powerful lobbying groups including the U.S. Chamber of Commerce. The Chamber’s Vice President of Workplace Policy is Mark Freedman. He — and his organization — says the new policy shows the administration’s bias.

“The Department of Labor’s new regulation redefining when someone is an employee or an independent contractor is clearly biased towards declaring most independent contractors as employees, a move that will decrease flexibility and opportunity and result in lost earning opportunities for millions of Americans,” Freedman said. “It threatens the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy. Making matters worse, the rule is completely unnecessary, as the [DOL] continues to report success in cracking down on bad actors that are misclassifying workers.”

It could have a huge impact on the gig economy.

Allan Bloom of Proskauer’s Wage and Hour Practice Group said the rule erases one the DOL passed in 2021 that made it easier for employers to classify workers as independent contractors.

“The Trump-era rule reduced the number of primary factors the DOL would consider when determining whether a worker is an independent contractor or an employee to two

‘core factors’ — the nature and degree of control over the work and the worker’s opportunity for profit or loss based on initiative and/or investment,” he said.

The Department of Labor says these are the six factors used as an “economic reality test” to define whether a worker should be an employee or an independent contractor.

  • Opportunity for profit or loss depending on managerial skill
  • Investments by the worker and the employer
  • Permanence of the work relationship
  • Nature and degree of control
  • Whether the work performed is integral to the employer’s business
  • Skill and initiative

Ben Brubeck of the Associated Builders and Contractors said his organization finds the rule difficult to interpret and ambiguous.

“Under the rule’s multifactor test, employers will now be forced to guess which factors should be given the greatest weight in making the determination,” Brubeck said. “Instead of promoting much-needed economic growth and protecting legitimate independent contractors, the final rule will result in more confusion and expensive, time-consuming, unnecessary and often frivolous litigation, as both employers and workers will not understand who qualifies as an independent contractor.”

American Trucking Association CEO Chris Spear agrees and said the rule replaces “a clear and straightforward standard with a tangled mess that weakens our supply chain and undermines the livelihoods of hundreds of thousands of truckers across the country.”

Spears also considers the move un-American.

“I can think of nothing more un-American than for the government to extinguish the freedom of individuals to choose work arrangements that suit their needs and fulfill their ambitions,” Spears said.

Source link: Insurance Journal —

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