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U.S. Department of Labor Aims to Broaden Who is an Employee

As the press widely reported in October, the Biden Administration's Department of Labor (DOL) has proposed new rules for employers to use when classifying workers. The DOL said the new regulations would broaden which workers may be entitled to protections under federal labor standards, decrease wage theft, and take away an unfair advantage to some businesses by classifying workers as independent contractors.

The Trump Administration previously implemented its own regulations on this issue. Those regulations required the analysis to focus solely on the degree of control by the employer and the worker’s opportunity to make a profit or loss. A federal judge had prevented the Biden Administration from withdrawing that standard. The DOL's latest proposal is its second attempt to roll back the prior administration's regulations. This current proposal requires employers to consider the five criteria traditionally used to determine independent contractor status. Unlike the prior administration's regulations, employers cannot give more weight to one element of the criteria over others. When classifying employees, employers must also consider the degree of permanence of the relationship and the amount of skill required for the job.

Uber and Lyft have publicly indicated a lack of concern about the potential impact of these proposed regulations. Uber noted the Obama administration had similar rules, and the company thrived. However, Lyft's and Uber's shares fell quickly following the announcement. The DOL's new proposed rules will not go into effect, if at all, for many months. Observers expect loud opposition from many businesses during the regulatory process and in the courts following its adoption.