To ensure that employees are not wrongly labeled as “independent contractors,” the Biden administration has enacted a new labor law. Millions of American workers could see an increase in their legal protections and pay as a result of this change
The new employee protection statute was officially signed into law by the Biden administration on Tuesday. Workers should not be mistakenly categorized as “independent contractors.” The financial and legal standing of millions of Americans could improve as a result of this.
According to these app-based services, the new legislation will not force Uber, Lyft, and DoorDash to reclassify its freelance drivers. Businesses will feel the effects of the regulation either way, depending on how the Labor Department chooses to implement it, say trade groups.
The Trump administration lowered the qualifications for workers to be categorized as contractors, and the proposed Labor Department rule, which has been in the works for fifteen months, would replace that standard. These workers are not assured even the bare minimum in pay, much alone perks like health insurance or paid sick leave.
Labor organizations support the rule because they believe companies have been taking advantage of the lax legislation to pay certain workers less than they are really owed. An erroneous classification of numerous individuals into the construction, truck driving, cleaning, gardening, security, and contact center businesses has been discovered by the politically biased Economic Policy Institute. The survey found that misclassified construction workers lose between $10,177 and $16,729 annually.
Businesses will be required to comply with the legislation beginning on March 11.
The law lays out six criteria that should be considered in determining whether an individual is an employee or a contractor, but does not give any weight to any of these elements. Contrast this with the policy that was in effect throughout Trump’s administration, which centered on two things: how much control businesses had over their workers and how much “entrepreneurial opportunity” they had on the job.
Critics of the new rule say it treats the issue of whether workers are really self-employed more comprehensively. Misclassified workers “sometimes work side by side with individuals who are properly classified, doing the same work,” said Acting Secretary of Labor Julie Su during a news conference on Monday night.
“However, workers who are incorrectly classified do not receive compensation for all of the hours they work,” according to Su. “Misclassification has caused their economic security to be eroded.”
The need for employers to determine whether employees’ roles are critical to the company’s operations is a potential challenge for applications such as ride-hailing and delivery services.
Services Employees International Union president Mary Kay Henry said that the new rule “takes direct aim” at the ways in which ridesharing companies “advantage of misclassifying workers to shirk accountability as employers, avoid paying their fair share and game a system already rigged in their favor,” referring to Lyft and Uber.
The employer must first establish how to prioritize a number of factors, such as the worker’s level of investment (in the form of a car payment, for example), the worker’s level of control over the employer, the need for specific skills, the length of the relationship between the two parties, and so on.
According to CR Wooters, Uber’s director of federal relations, the regulation will not impact the categorization of the more than one million Americans who use Uber as a flexible income source, and it does not alter the legal framework under which the company operates.
“This new guidance creates additional complexities and ambiguities for companies and courts alike across the country,” Lyft stated, emphasizing that the company would not be compelled to alter its business model in response to the new legislation.
“Seek to ensure implementation of this rule does not target workers who overwhelmingly turn to app-based platforms to earn supplemental income on their own terms,” said the Flex Association, a group that represents major app-based transportation and delivery services.
Following New York’s lead, the new policy ensures that app-based workers get a minimum wage and other benefits
Marc Freedman, the VP of workplace policy at the U.S. Chamber of Commerce, has said that the law might face legal challenges.
Businesses would find it difficult to choose among the six criteria under the new guidelines, according to Freedman. He claims that the framework is biased toward treating workers as employees, but that the result will depend on how aggressively the Labor Department enforces the law.
For Freedman, this “leaves employers in the dark about whether they made the right decision” (AP, interview). “Claiming an employee is the only way they can be sure of someone’s reliability.”
According to Jessica Looman, the administrator of the wage and hour division, the final regulation is not intended to apply to specific industries or jobs. Looman said that the agency’s enforcement efforts will focus on assisting the “most vulnerable workers,” or those who are unjustly denied overtime and minimum pay, when questioned about this matter.
This regulation does not have the force of law, unlike legislation passed by the federal or state governments. Rather, it rules on who should be able to benefit from the 1938 Fair Labor Standards Act protections.
On Tuesday, it seemed as if the new law had little impact on the financial markets. With a 2.2% increase, Uber’s shares outperformed Lyft. Their respective drops of 10% and 12% occurred in October 2022, when the government announced the new rules.
