New labor department regulation may change status of gig workers

One of the most revolutionary changes in the labor market in the last 20 years has been the rise of the so-called “gig economy,” an economy where small businesses offer services such as on-call transportation, shopping, restaurant delivery and the like. The individual entrepreneurs who sell their services through a clearing house or central dispatch service occupy a significant number of jobs.

One estimate said that one sixth of all Americans has worked in the gig economy. The U.S. Labor Department has been struggling to classify these individuals. Are they independent contractors or some undefined class of employees? An answer may be coming soon.

A new administration may yield new regulations

Under the Trump administration, the Labor Department followed regulations from the Obama administration, acting only in early 2021 to relax the regulations applicable to gig workers. Employers were given license to treat their workers as either employees or independent contractors. For obvious reasons, i.e., lower costs, employers chose to treat their workers as independent contractors.

With the coming of the Biden administration, and its pro-union stance, many observers believe that workers in the gig economy will soon be classified as employees and be given the right to health care, sick leave, mandatory overtime and other benefits.

Labor Department’s current proposed regulations

The Labor Department has issued a set of proposed regulations that will affect gig drivers. These regulations do not make gig workers into employees who would be entitled to mandatory minimum wage, mandatory overtime, and payment for time on duty even if they do not have a passenger in their vehicle.
The proposed regulations broaden the tests for determining whether a person is an employee or an independent contractor (these regulations could conceivably affect the categories of employees who are exempt from mandatory overtime and the federal minimum wage). Some analysts believe that passage of these regulations would put pressure on companies that rely on gig workers to offer health insurance and vacation pay, especially for full-time workers.

State action

Individual states may also begin to enact new regulations for rideshare drivers. Washington state has already guaranteed gig drivers a charge of $1.65 per mile, which is more than double the prevailing rate in California. The drivers will also receive workers’ compensation insurance, paid time off and a right to appeal if they are terminated.
Rideshare drivers have pushed for most of the changes, but most of them are drawn to the flexibility of the rideshare model.

Solid advice from a knowledgeable employment lawyer

The government regulations that will determine who is an independent contractor or an employee are certain to undergo modifications during the remainder of the Biden Administration. Given the complexity of the issues and the fervor of the competing parties, the regulations may require significant revision for the sake of clarity. Anyone who has questions about the new regulations may wish to consult an experienced employment lawyer for an interpretation of any new regulation.