Contractor or Employee? Labor Department Proposes New Definitions

Contractor or Worker? Labor Division Proposes New Definitions

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The U.S. Division of Labor has printed a brand new proposal on how staff must be categorised, saying that hundreds of individuals have been incorrectly labeled as contractors relatively than staff, doubtlessly curbing entry to advantages and protections they rightfully deserve.

Misclassifying staff as impartial contractors denies these staff protections underneath federal labor requirements, promotes wage theft, permits sure employers to realize an unfair benefit over companies and hurts the economic system, the division mentioned Oct. 11.

The response in markets for main gig firms was rapid. Shares of Lyft and Uber tumbled about 13% in early buying and selling.

The misclassification of staff has negatively impacted truck drivers, supply staff, custodians, waiters, development staff and extra, in accordance with the division.


“Whereas impartial contractors have an vital function in our economic system, we’ve seen in lots of circumstances that employers misclassify their staff as impartial contractors, significantly amongst our nation’s most weak staff,” mentioned Secretary of Labor Marty Walsh in a ready assertion. “Misclassification deprives staff of their federal labor protections, together with their proper to be paid their full, legally earned wages.”

American Trucking Associations Vice President of Workforce Coverage Nick Geale mentioned: “ATA is reviewing the brand new proposed rule and appears ahead to offering suggestions to the Division, however we’re disillusioned this proposal seeks to undo the present rule which has introduced wanted readability to the difficulty of impartial contractor standing.”

The Labor Division’s proposed rule would assist employers and staff decide whether or not a employee is an worker or an impartial contractor underneath the Honest Labor Requirements Act.

“It is a long-awaited dedication that can empower important staff to claim their primary wage and hour, well being and security, and compensation rights,” mentioned Patricia Campos-Medina, govt director of the Employee Institute at Cornell College’s College of Industrial and Labor Relations. “All staff are entitled to those rights, however employers simply keep away from them by making arbitrary selections on impartial contractor guidelines.”

Wedbush analyst Dan Ives mentioned the proposal would represent a serious change for staff and employers from earlier years.

“A classification to staff would primarily throw the enterprise mannequin the wrong way up and trigger some main structural modifications if this holds,” Ives wrote.

Final yr the Biden administration repealed a Trump-era rule that may have made it simpler to categorise staff as impartial contractors. The repeal meant the Labor Division was in a position to proceed utilizing current guidelines underneath the 1938 Honest Labor Requirements Act to find out whether or not a employee must be categorised as an impartial contractor.

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