U.S Labour Laws: Biden Administration’s new rule requires workers to be considered as employees, not contractors!
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In what is being lauded by many as a “victory for gig workers,” the U.S. Labour Department on Tuesday 9th January, announced a new rule that makes it harder to classify workers as independent contractors.
The standard, set to take effect in March, will require companies to offer workers who are no longer deemed contractors the same benefits and legal protections as employees, including the right to the minimum wage, overtime pay and unemployment insurance. The rule, first proposed 15 months ago, has faced criticism from business groups worried about labour costs as well as some gig workers who say they prefer the freedom.
App-based companies that rely on freelance workers, such as Uber and Door Dash, are expected to see some of the biggest impacts.
The new rule says a worker should be considered an employee depending on factors such as the degree of control an employer has over their work and the permanence of the relationship. Millions of gig workers could be potentially reclassified, according to The Washington Post.
The Labour Department also rescinded a Trump-era rule on Tuesday that allowed more workers to be classified as contractors.
The Labour Department said it does not expect the rule to lead many companies, let alone entire industries, to reclassify workers. But it will enable more effective enforcement against businesses that purposely misclassify workers to save money, the agency said in the rule.
Business groups and Republican lawmakers strongly criticized the rule on Tuesday, saying it will cause millions of workers to lose opportunities to earn money and would create confusion that will spur costly litigation.
U.S. Senator Bill Cassidy, a Republican from Louisiana, said in a statement that he would introduce a resolution to repeal the rule. Cassidy said the rule would bolster labour unions’ efforts to increase their membership, as independent contractors and freelancers cannot join unions.
The rule is set to take effect on March 11.
POTENTIAL IMPACT ON ‘GIG’ WORKERS
The Labour Department has said the rule was designed to crack down on industries, including construction and healthcare, where misclassification of workers is common. But its potential impact on app-based delivery and ride-hailing services, whose business models depend on contract “gig” labour, has garnered the most attention.