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How a New Labor Rule Would Shift Some Gig Workers to Employee Status

The U.S. Department of Labor is discussing a proposed rule change in how the department classifies workers. The new rule seeks to clarify the difference between an 'employee' and a 'contractor.'

Details of the Proposed Rule

In early October of 2022, the U.S. Department of Labor proposed a rule that would make it more difficult for companies to treat workers as independent contractors. The rule's language would have widespread implications for industries that have relied heavily on contractor labor, like ride-sharing and delivery services.

In recent years, corporations like Uber, Lyft, and Amazon have sought to increase profit margins by relying heavily on contractor labor rather than employee labor. Contractors do not enjoy the same benefits as employees, like:

  • Overtime pay
  • Workers' comp
  • Minimum wage
  • Legal protections
  • Guaranteed wages
  • Insurance benefits

Because employees enjoy far greater benefits than contractors, employees cost companies about 30% more than contractors do, hence why many companies have been shifting to a worker-contractor model to reduce costs and boost profits.

The Labor Department largely considers the current contractor labor force for ride-sharing and delivery companies to be economically dependent on those companies; ergo, such “contractors” are contractors in name only and instead better meet the definition of an employee. In the new rule, the Labor Department says it will consider factors like workers' opportunity for profit or loss, the permanency of their jobs, and the degree of control a company exercises over a worker when considering whether or not such contractors should be treated as employees.

Will the New Rule Enable Uber & Lyft Drivers to File for Workers' Comp?

The U.S. Labor Department has recently been vocal in saying American corporations are misclassifying workers as contractors to boost profits. Quoting U.S. Labor Secretary Marty Walsh:[1]

  • "Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages."

While the Labor Department is receiving pushback from the business community, worker advocacy groups largely support federal regulations that would force corporations to classify workers as employees, not contractors. Given that nearly 60 million Americans perform freelance work (one-third of the workforce), a rule change in how the U.S. regulates worker classification stands to benefit a huge swath of the American workforce.

Gig economy workers will experience considerable benefits if the Labor Department's proposed rule change and new regulations take effect. From Uber and Lyft drivers to delivery drivers for Amazon and Walmart to personal trainers, salon technicians, and day laborers, all will have better negotiating power and increased protections when interacting with their employers.

For example, workers who previously had no protection under workers' comp laws will now be protected. That is of particular benefit to Uber & Lyft drivers, as such drivers are at high risk for car accidents, personal injury, property damage, and loss of quality of life.

Seek Help from Ohio's Largest Workers' Compensation Law Firm

NRS Injury Law is committed to advocating for workers' rights and protections. In proud support of the Labor Department's considered rule change, NRS stands by, ready to represent workers who earn employee protection and may need workers' compensation in Ohio. Call 855.468.4878 for more information, or fill out our convenient contact form.

Sources:

[1] BI. "New labor rule would make some contractors employees." Business Insurance, 2022. businessinsurance.com

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