The Ministry of Labor proposes rules to reclassify contractors

(The Hill) – The Ministry of Labor on Tuesday announced a proposed rule that will reclassify some independent contractors as company employees, a move that could disrupt the gig economy.

The highly anticipated rule is aimed at companies that the Biden administration said “misclassified” their employees as contractors. By being an employee, that employee will be covered by overtime and minimum wage laws that do not apply to contractors.

“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages,” Labor Secretary Marty Walsh said in a statement.

Unions have pushed the Biden administration to crack down on industries that rely on contractors, including ride-share companies like Uber and Lyft, saying those workers are losing key benefits and will have trouble unionizing because of their contractor status.

The Labor Department said Tuesday that misclassification is a problem in several industries, including home care, janitorial services, delivery, trucking and construction. The department said the widespread problem has forced some businesses to compete and misclassify their workers as contractors.

The Biden administration’s rule would replace Trump administration guidelines that made it easier for companies to classify workers as contractors. That is likely to draw fierce opposition from business groups pushing the Trump administration’s rules.

Uber and Lyft each saw their stock prices fall about 14 percent after the announcement. Gig companies could see their labor costs increase by up to 30 percent if they are required to reclassify contractors as employees, experts say.

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