Labor department proposes new rule on independent contractors

The Department of Labor (DOL) is issuing a proposed rule that could reclassify millions of people as employees rather than independent contractors, rescinding a 2021 policy and potentially affecting workers in a variety of industries, including trucking and delivery services.

The proposed rule, which DOL said it will publish Thursday, will guide employers and workers in determining whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). The department said the proposal is aimed at preventing misclassification of employees, which Secretary of Labor Marty Walsh said in a press release “deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

The proposal would rescind the 2021 Independent Contractor Rule, a Trump-era policy that is viewed as favorable to classifying workers as independent contractors. The new rule would return to pre-2021 guidelines and include a test employers would use to determine if a worker should be classified as an employee or an independent contractor. The test evaluates whether or not workers are in business for themselves and whether their work is considered an “integral” part of the company’s business, among other factors.

Some industry groups claim the proposed change is unnecessary and could become a costly burden to employers.

“The current rules clearly define the difference between employees and independent contractors, providing much-needed legal certainty for employers, employees, and independent contractors alike,” David French, senior vice president of government relations for the National Retail Federation, said in a statement Tuesday. “The changes being proposed by the Labor Department will significantly increase costs for businesses across all industries, and further drive already rampant inflation.

“NRF staunchly opposes a change in this important area of law, which is both unwarranted and unnecessary. This decision will only foster massive confusion, endless litigation, reduced innovation and fewer opportunities for employees and independent contractors alike.”

The public will have 45 days to comment on the proposal following Thursday’s publication in the Federal Register.