New labor rule tightens classification standards for gig workers

Uber, Lyft say their drivers won’t be affected by change

New York — The Biden administration enacted a new labor rule Tuesday that aims to prevent the misclassification of workers as “independent contractors,” a step that could bolster both legal protections and compensation for millions in the U.S. workforce.

Major app-based platforms including Uber, Lyft and DoorDash expressed confidence that the new rule would not force them to reclassify their gig drivers. But business groups warned the rule creates uncertainty for employers and much depends on how the Labor Department decides to enforce it.

The Labor Department rule, which the administration proposed 15 months ago, replaces a Trump-era standard that narrowed the criteria for classifying employees as contractors. Such workers are not guaranteed minimum wages or benefits, such as health coverage and paid sick days.

Labor advocates have supported the rule, saying employers have exploited lax rules to misclassify workers and avoid properly compensating them. In a report, the left-leaning Economic Policy Institute said construction workers, truck drivers, cleaners, landscapers, security guards and call center workers are among the most commonly misclassified workers. It estimated that misclassified construction workers lose between $10,177 and $16,729 per year.

The rule, while will take effect March 11, directs employers to consider six criteria for determining whether a worker is an employee or a contractor, without predetermining whether one outweighs the other. That’s a change from the Trump-era rule, which prioritized two criteria: how much control a company has over its workers and how much “entrepreneurial opportunity” the work provides.

Advocates say the new rule offers a more comprehensive approach to determining whether workers are truly in business for themselves.