Federal Independent Contractor Rule Rescinded

Announced Wednesday by the US Department of Labor and published yesterday, a Trump-era rule known as the “Independent Contractor Rule” which limited some workers’ rights was rescinded.  The Independent Contractor Rule limited the ability of gig workers, contract workers, and employees misclassified as independent contractors to pursue correct classification, minimum wage, and overtime.  The US Secretary of Labor says that the goal of the policy reversal is to “preserve essential worker rights and stop the erosion of worker protections”.

The Department of Labor listed three main reasons why they are rescinding the rule:

  • The rule did not meet the requirements of the Fair Labor Standards Act and rulings by the judicial branch
  • The focus on two core factors (control over one’s work and one’s opportunity for profit or loss based on initiative and/or investment) was not a balanced approach to determining employment relationships
  • The rule took too narrow a view to determine worker status

See the full Department of Labor press release here.

A battle over this type of employee classification happened recently in California.  In 2019, California Assembly Bill 5 was passed, expanding the definition of what an employee is. AB 5 would have given employee benefits to many gig and contract workers, including Uber and Lyft drivers.  Before the law could take effect, the affected companies rallied behind Proposition 22, a 2020 ballot measure which exempted app-based drivers from AB 5, spending over $200 million to promote voting yes on Prop 22.  Prop 22 passed with 59 percent of the vote.  The passage of Prop 22 is one of several reasons why ridesharing companies are struggling to find enough drivers as demand begins to increase.

Though the withdrawal of the Independent Contractor Rule only returns the government’s view of employee classification to the status quo, ride sharing companies have seen it as an attack on their business.  It is unknown what may happen if the 2020 battle over Prop 22 is taken to the national stage.

Employment law protects the rights of workers, including workers who may be incorrectly classified as independent contractors.  Independent contractors who are misclassified lose access to many important employee benefits, including minimum wages, overtime pay, unemployment, and more.  Unsure if you should be classified as an employee or independent contractor?  The IRS provides some guidelines as to what workers should qualify as an employee.

The Law Offices of Scott Warmuth’s employment law division can help employees misclassified as independent contractors ensure they receive all their entitled benefits.  Call us today at 888-517-9888 for a free consultation and case evaluation.

Leave a Comment