The Department of Labor proposed a rule on Tuesday that would make it easier for employers to classify workers as independent contractors not subject to minimum wage, a change from Biden rules meant to treat gig workers more like regular employees.
The Labor Department said that the new rule would rescind a 2024 rule that was finalized under former President Joe Biden, and return the process to a standard that is similar to what it was back in 2021. The change is notable given the rise of gig workers like rideshare drivers in recent years.
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“The tens of millions of Americans who work as independent contractors are helping drive the Golden Age of the American economy,” said Secretary of Labor Lori Chavez-DeRemer.
“The department’s proposed rule seeks to protect these workers’ entrepreneurial spirit and simplify compliance for American job creators navigating a modern workplace, all while maintaining robust protections for employees under the Fair Labor Standards Act,” she added.
Specifically, the proposed rule would apply an “economic reality” test that would determine if a worker is in business for themselves as an independent contractor or is dependent upon an employer for work.
The rule identifies two factors in making this analysis, the first being the nature and degree of control over the work, and the second being the worker’s “opportunity for profit or loss based on initiative and/or investment,” the Labor Department said in a news release.
The rule would also work to identify additional factors that determine whether a worker is an employee or an independent contractor, for instance, the degree of permanence of the working relationship, skill required, and more.
Education and Workforce Committee Chairman Tim Walberg (R-MI) said in a statement that the proposed rule “updates regulations to match how people actually work today.”
“Flexibility and freedom matter,” Walberg said. “For millions of Americans, independent contracting is a way to start a business, earn extra income, support a family, or turn a good idea into a real opportunity. They should be able to do that without unnecessary red tap standing in the way.”
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The Tuesday announcement of the proposed rule now starts a 60-day public comment period that ends in late April.
How to handle the rise of gig workers has become a major issue, including on Capitol Hill. In July, Republicans unveiled legislation that would make it easier for companies to provide benefits, such as healthcare, to independent workers.
