Biden administration proposes new rule that could upend "gig" work

The Biden administration is proposing a rule that could result in more "gig" workers being considered full-time employees, a potentially major shift in the nation's labor laws that could disrupt ride-sharing, delivery, construction and other companies that employ independent contractors.

The draft rule, to be formally published on Thursday, is a test that the Department of Labor uses when it determines if employers broke wage and hour laws. It formally directs the agency to consider six factors when determining if a worker is an employee — and therefore entitled to minimum wage, overtime and the right to unionize — or an independent contractor, which is essentially a self-employed individual in business for themselves.

"We continue in our enforcement work to identify workers who are not properly classified, in construction, health care, even in restaurants, where we found that dishwashers were improperly classified as independent contractors to avoid paying them overtime," Jessica Looman, principal deputy wage and hour administrator with the Labor Department, told reporters on Tuesday.

After the Labor Department proposal is published, the rule will remain open for public input for 45 days, officials said.

"This is a long-awaited determination that will empower essential workers to assert their basic wage and hour, health and safety, and compensation rights," Patricia Campos-Medina, executive director of the Worker Institute at Cornell University's School of Industrial and Labor Relations, told the Associated Press, adding, "All workers are entitled to these rights, but employers easily avoid them by making arbitrary decisions on independent contractor rules."

Independent contractors are typically much cheaper to hire since they are responsible for their own payroll taxes and job expenses and don't qualify for overtime or minimum wage. The National Employment Law Project, a pro-worker think tank, has estimated that as many as 30% of workers may be wrongly categorized as as independent, costing states billions of dollars in tax revenue.

The proposed rule replaces a Trump administration regulation that made it easier for companies to legally classify workers as independent contractors. Labor Secretary Marty Walsh maintains that thousands of workers, including gig workers who drive cars, deliver food and clean houses, are actually employees, because the companies that hire them set their hours and pay.