U.S. Department Of Labor Issues Final Independent Contractor Rule Opposed By Business Groups
On January 10, 2024, the U.S. Department of Labor published a final regulation that revised the department’s guidance regarding how companies should analyze who is an employee, and who is an independent contractor, under the Fair Labor Standards Act (FLSA). In determining a worker’s status, the department will weigh six factors, including a worker’s opportunity for profit or loss, the degree of control wielded by a company over a worker, and whether the work is an integral part of the company’s business.
The rule then requires businesses to extend the benefits and protections offered to employees or individuals who no longer fit the status of a contractor.
The new rule will take effect on March 11, 2024. It replaces one established by the previous administration that had a much broader definition of what constituted contract labor.
As Reuters noted the regulation is widely expected to increase labor costs for industries that rely on contract labor or freelancers, such as trucking, manufacturing, healthcare, and app-based ‘gig’ services. Business groups strongly condemned the rule.
The DOL’s regulation “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,” the U.S. Chamber of Commerce 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 Department continues to report success in cracking down on bad actors that are misclassifying workers. The U.S. Chamber will carefully evaluate our options going forward, including litigation.”
In related news: The U.S. House of Representatives recently approved legislation to repeal the National Labor Relations Board’s “joint employer” rule, set to take effect in February, which would treat companies as the employers of many contract and franchise workers and require them to bargain with those workers’ unions. Read more about this rule here. The House vote was 206-177 and it sends the proposal to the U.S. Senate, which may approve it.
As Reuters also reported, Democrats hold a one-seat majority in the Senate, but Sen. Joe Manchin (D-W.Va.) has said he opposes the rule. That’s not all: This regulation, like the one from the U.S. Department of labor, almost certainly will face litigation. Stay tuned to Connecting the Dots as these stories develop.