KEY POINTS
- The U.S. Department of Labor on Tuesday issued a notice of proposed rulemaking on guidelines around employers’ classification of workers as employees or independent contractors.
- The rule isn’t likely to have dramatic effects but could result in more people being deemed employees.
- Employees are granted federal protections like minimum wage and overtime pay.
The Biden administration will soon issue a rule that may make it easier for workers to be considered “employees” instead of “independent contractors.”
The U.S. Department of Labor issued a notice of proposed rulemaking on Tuesday, signaling its intent to issue a formal regulation that would redefine how employers classify their workers.
The employee label carries worker protections like a minimum hourly wage and overtime pay. Workers misclassified as contractors may be eligible for damages covering some back pay of those benefits. Employees also qualify for unemployment benefits and worker’s compensation, for example.
The Labor Department would unwind a Trump-era rule concerning independent contractors that took effect in January 2021, shortly before President Biden took office. The agency would largely reinstate the prior status quo with a few changes, experts said.
Misclassification of workers as independent contractors — also known as freelancers or the self-employed — instead of employees is happening across many industries, like construction, health care, restaurants, retail and transportation, Labor Department officials said Tuesday.
Employers may benefit financially by classifying their workforce as contractors instead of employees. For one, they don’t have to pay the payroll taxes that fund Social Security or unemployment insurance programs.
