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Trump’s DOL: Make Employees Independent Contractors

New rule classifies employees as contractors, lowering wages and shedding benefits

Brian Young's picture
Sep 23, 2020

In recent years, especially as work has changed from a 9-5 job in the office, to more remote, more freelance, and more app-based work, there has been an explosion of workers who are classified as independent contractors. As the increase in independent contractors has happened, everyone from bosses to employees to courts have asked the Department of Labor for a clearer rule to govern who could be declared an independent contractor.

On Tuesday, the Department of Labor (DOL) finally released their proposal. In the new rule, the DOL outlined five factors that would determine if a worker is an independent contractor. They would give the greatest weight to two core factors, the nature and degree of the employer’s control over the work and the workers' opportunity for profit or loss based on personal initiative or investment. The rule also has three additional guideposts or criteria including the amount of skill required in the work, the degree of permanence in the work relationship and whether the work is part of an integrated unit of production. This standard is much shorter and narrower than the previous rule.

Currently, the DOL looks at the employer’s control over how the employee does their work, but this new rule will flip that to consider how much control the employee has over their work. This would seem to be a change in the favor of bosses, especially gig economy companies. They could now claim that their workers are independent contractors because the employee controls their hours and days of work, whereas before this was less clear since the company provided the tools for work such as an app that delivers rides to an Uber driver.

While the new proposed rule was praised by bosses, worker advocates are blasting the change as a corporate giveaway. According to Bloomberg Law, if the rule is instituted, businesses would stand to save $481 million a year. This is largely from a reduction in legal costs associated with cases filed by workers claiming misclassification. That’s before they even calculate the hundreds of millions that would be saved by companies that decide to move their workers from full-time employees to contractors and take away their benefits. By making them contractors, it also means the company does not have to follow minimum wage or overtime laws. For example, a company could pay someone $500 a week to work for 40 hours, a rate of $12/hour. Under the new proposed rule, by classifying them as independent contractors, they could still pay them $500 a week but now have them work 50 hours and not have to pay overtime or worry about their wages dropping below the minimum wage.

Fearing Trump may lose in November, the DOL has said they will try and push the rule through as fast as possible. It must have a 30-day public comment period and then from that feedback, the DOL can issue changes before it goes to the White House for approval. However, no matter how fast they move, if Biden is elected, it could be repealed or changed in the workers' favor early in his first year.

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