Report from Bloomberg
In Brief – The US Department of Labor (DoL) has proposed a new rule setting standards for employers and workers to determine if a worker is properly classified as an independent contractor or a company employee. The proposal, which has been released for 60 days of public comments, would replace a Biden-era rule finalized in 2024 that made independent contractor classification more difficult. During the first Trump Administration, the DoL promulgated what was widely regarded as a business-friendly worker classification regime based on a five-factor test to determine whether a person was an independent contractor or was economically dependent on the employer and therefore should be classified as an employee. The new proposal is presented as being a little clearer and more streamlined than the 2021 rule, designating two of them as “core factors”, the nature and degree of control over the work by the business, and the worker’s opportunity for profit or loss based on initiative and/or investment. The DOL estimates the number of independent contractors could increase by up to 750,000, primarily through new workers rather than reclassification of existing employees.
Context – Some might remember when there was significant momentum to end so-called “phony” independent contractors and force “Gig” platforms to classify the people who used them to work as employees with applicable rights and benefits. However, new work models that give freelancers valuable flexibility and independence have proven resilient. In the US, the Biden Administration always expressed support for classifying gig workers as platform employees, but legislation was stymied after California’s largely Democratic voters soundly rejected classifying gig-drivers as platform employees. The Biden DoL seemed to slow-roll new rules and the second Trump DoL was fully expected to shift standards back. In the EU, supporters of the Platform Work Directive initially intended to set uniform gig worker employee classification standards, but the final version left worker classification specifics largely in the hands of each member state.