The Department of Labor’s independent contractor rule change is great news for America’s workforce
America’s workforce has long needed a consistent, clear, and unrestrictive interpretation of independent contractor status under the 1938 Fair Labor Standards Act.
It now has one.
The Department of Labor recently finalized an interpretation, proposed in October, that would loosen restrictions on the classification of independent contractors, helping these workers retain the flexible status they enjoy.
The department wrote that its updated guidance would “promote certainty for stakeholders, reduce litigation, and encourage innovation in the economy.”
This development couldn’t come soon enough.
Freelancing, independent contracting, and gig work are under siege by proposals in Congress, such as the PRO Act, and state laws, such as California’s AB-5. These efforts to over-regulate flexible work will hurt workers.
- The gig economy has helped Saginaw Valley State University student Alison Rigterinkmake extra money and gain valuable work experience between her classes.
- Pennsylvania’s Marilyn Costicworries that efforts to restrict independent contracting will hurt or destroy the business she has grown over nearly four decades.
- Brian Feulner, a California-based photojournalist, fears that AB-5 will force him to convert to employee status or stop producing videos entirely.
The Department of Labor’s updated guidance will bring greater assurance to these and other independent contractors. The new rule would:
- Clarify the “economic reality” test to determine a worker’s status as an employee or an independent contractor.
- Identify and explain the nature and degree of workers’ control over their work and their opportunity for profit or loss based on initiative and investment, to determine whether the workers are economically dependent on another party’s business or are in business for themselves.
- Establish additional guidelines for classification, such as the amount of skill required for the work, the relationship permanence between the worker and client, and whether the work is part of an integrated unit of production.
- Advise that the actual practice of work is more relevant than what may be theoretically or contractually possible in determining worker classification.
“Independent contracting is more important than ever, giving millions of Americans an avenue to earn a living in a way that works for them,” said Americans for Prosperity policy analyst Austen Bannan. “This rule puts people in control of their economic fortunes, removing a complicated and burdensome regulatory framework that made it difficult for businesses and independent contractors to work together.”
Bannan added that Congress also has a role to play in protecting independent contracting, something that could be accomplished by providing more flexibility to businesses that want to offer their independent contractors voluntary benefits and allowing these workers to use innovative resources, such as digital marketplace companies, to grow their businesses without taking away their independence.
Lawmakers need to hear from you to create a better framework around independent contracting. Sign the petition to support these workers and oppose unfair efforts to limit their freedom and opportunity.
