Last month the Department of Labor (DOL) announced it's releasing new guidance to help determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.
The announcement got a lot of press coverage, most of it saying the new guidelines will make it much harder for companies to classify workers as independent contractors. Examples include:
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Wall Street Journal's Biden Rule Would Add More Gig Workers to Company Payrolls
- New York Times's Biden Proposal Could Lead to Employee Status for Gig Workers
- NPR's Labor Department proposal could change gig worker and company rules
But - and this is a big but - the new guidance basically returns the guidance to where it was under the Obama administration. Key quote from the Wall Street Journal article on the proposed guidance:
"It would replace a Trump-era rule—completed just days before the Biden administration took office—and return to an approach favored by the Obama administration."
In other words, the guidance is reverting back to what it was between 2008-2019.
In case you weren't following independent work and the gig economy between 2008 - 2019, it grew dramatically. So going back to an approach favored by the Obama administration is unlikely to have a major impact on independent workers.
Bloomberg's Uber, Lyft Shares Fall on Possible Changes to How Gig Workers Are Classified also points out:
"Companies had anticipated the Biden administration would reinstate the Obama-era guidance on the classification, and the proposal didn't come as a surprise, according to Tom White, an analyst at DA Davidson & Co. "It has no immediate changes to anything related to how companies operate their business," White said. "It's a proposal that in some ways can be viewed more like a conversation starter."
So don't expect significant near term changes in the gig economy based on the new guidance.
But having said that, all the press saying it will have an negative impact on the gig economy, will have an impact. And that impact will likely be companies - and their lawyers - choosing to be more conservative about the use of nonemployee labor.
But this will be a relatively minor impact.
The legal issues around worker classification, the DOL's role, and why the new rules aren't going to have a major impact are too long and complicated for this blog post. So we're not going to cover them here.
For those interested in more depth on this topic, we recommend the Independent Contractor, Misclassification, and Compliance blog.
Their article THE LABOR DEPARTMENT'S INDEPENDENT CONTRACTOR RULE HAS LITTLE IF NO LEGAL IMPACT BUT IS LIKELY TO CAUSE ANXIETY FOR MANY STAKEHOLDERS covers this topic in-depth.
The article's title, in our opinion, also nicely sums up the impact of the new guidance.
