On Tuesday, the Biden administration implemented a new labor policy to prevent the mislabeling of employees as “independent contractors.” This action could potentially increase legal rights and income for numerous individuals in the American workforce.

The proposed Labor Department regulation, which was first introduced 15 months ago, supersedes a previous standard implemented by the Trump administration that made it easier to classify workers as contractors. This classification means these workers are not entitled to federal minimum wage protection or eligible for employee benefits like health insurance and paid sick leave.

The alterations have been perceived as particularly negative for businesses such as Uber and DoorDash – trailblazers of the gig economy, where companies depend on independent contractors for services without typical labor safeguards. While some gig workers value the flexibility to choose their own work hours, others criticize being taken advantage of by these companies.

On Monday, financial markets did not seem to react to the leaked news about the agreement. The stocks of Uber and Lyft had previously dropped by 10% and 12% when the proposed rules were announced in October 2022, but on Monday they increased by 2.5% and 5.8% respectively. However, on Tuesday before the opening bell, shares were down by approximately 1%.

There is a notable alteration in the updated regulations, set to go into effect on March 11, regarding how the Labor Department and federal judges determine if workers are correctly classified as independent contractors. Specifically, employers must now assess if the tasks performed by these workers are essential to the company’s operations.

This may have an impact on companies that operate through apps and heavily depend on independent contractors. In these situations, this rule could shift the balance towards categorizing these individuals as full-time employees instead of freelancers.

Employers must now take into account six factors when determining if a worker is an employee or contractor, without giving more weight to one over the other. These factors include the level of control the employer has, the specialized skills needed for the job, the longevity of the worker-employer relationship, and any investments made by the worker (such as car payments).

The regulation, though, does not hold the same authority as laws enacted by Congress or state legislatures, and it does not indicate which particular company or industry should reclassify their employees. It simply provides an explanation of which individuals are eligible for safeguards under the 1938 Fair Labor Standards Act.

Source: wral.com