The Labor Department in a final rule released on Wednesday would make it more difficult for a gig worker, such as an Uber or DoorDash driver, to be counted as an employee under federal law. That means those workers wouldn’t be covered by federal minimum-wage and overtime laws, and they could be responsible for paying the employer portion of Social Security taxes.
The rule won’t go into effect until March 8, after President-elect Joe Biden is inaugurated on Jan. 20. Biden spokeswoman Jen Psaki last week, in a press briefing, pointed to the then-pending independent contractor rule as an example of the type of last-minute regulation Mr. Biden would seek to halt or delay with a memo he intends to sign on inauguration day. She said the rule would make it easier for companies to misclassify employees.
Flexible work is overwhelmingly preferred by those who choose to earn on gig-economy platforms such as Uber, Danielle Burr, Uber Technologies Inc.’s head of federal affairs, said Wednesday.
“Forcing a binary choice upon workers—to either be an employee with more benefits but with less flexibility, or an independent contractor with limited protections—is outdated,” she said, noting Uber has offered additional benefits to drivers. “We appreciate the efforts made to modernize our nation’s laws.”
The Labor Department’s action follows a 2019 California law that required businesses to reclassify many contract and gig workers as employees, giving those workers access to the state’s minimum wage and overtime laws, workers’ compensation coverage and paid sick days. In November, California voters approved a ballot proposition that exempted Uber, Lyft Inc., DoorDash Inc. and similar companies from the law, which would have reshaped their business model.
DoorDash said the food-delivery company is committed to ensuring its workers can maintain flexible earnings opportunities. The vast majority work fewer than 10 hours a week, or an average of four hours a week or less. “We’re eager to continue working with lawmakers across the political spectrum at both the state and federal level,” a DoorDash spokesman said.
The rule “respects the time-honored American tradition of being your own boss,” Deputy Secretary of Labor Patrick Pizzella said. He said the California law had skewed the definition of an independent contractor, and added the new federal rule would increase opportunity for gig workers, and give them greater control over their lives.
A separate Labor Department official said states aren’t required to follow the federal rule, but the department hopes the rule can be a model for states.
“There will be efforts in several states to pass laws for which the Labor Department rule will be the basis,” said Michael J. Lotito, co-chairman of law firm Littler Mendelson P.C.’s Workplace Policy Institute and an attorney who represents businesses. Other states have used aspects of California’s laws as a model.
Labor unions, taxi drivers and workers’ advocates were among those who wrote letters protesting the plan, saying employees often have access to benefits, including health insurance and retirement plans, that independent contractors don’t have.
“The rule gives license to employers to call most of their workers independent contractors,” said Catherine Ruckelshaus, general counsel at the National Employment Law Project, which advocates for low-wage workers. “That would dramatically narrow worker protections…in the jobs that particularly need them, including construction, agriculture, janitorial and delivery jobs.”
Ms. Ruckelshaus said NELP is ready to challenge the rule in court, but added that might not be necessary, depending on the actions of the Biden administration.
Business groups, including the Chamber of Commerce, Associated Builders and Contractors and National Federation of Independent Business, also backed the rule, which they say provides greater clarity to a labor law passed in the 1930s.