The Biden administration is releasing a new labor regulation that would make it harder for employers to skirt minimum wage and overtime obligations by labeling workers as “independent contractors.”
The final rule, announced Tuesday and slated to go into effect March 11, seeks to crack down on the Trump regulation shortly after taking office, signaling a likely return to the crackdown on misclassification in the Obama era.
Su said the Trump rule “departed from long-standing judicial interpretations” on the issue.
“The previous rule made it easier for businesses to misclassify workers,” Su said.
The Labor Department estimates that 22 million U.S. workers are deemed independent contractors. Officials have pointed to an estimate from the National Employment Law Project that 10% to 30% of those contractors should really be classified as employees who would be eligible for workplace protections and benefits.
By using contractors, companies can avoid certain costs associated with employment, such as payroll taxes and workers’ compensation, and also make it more difficult for employees to form unions. Worker advocates and labor unions say misclassification has gotten out of hand, with employers using it to foist the traditional costs of employment onto workers.
The U.S. Chamber of Commerce and other business lobbies have opposed the independent contractor reforms, which the administration first proposed in October 2022. The rule released Tuesday follows a public-comment period in which workers and employers were given the opportunity to weigh in. A lawsuit by opponents could delay or block its implementation.
The Labor Department isn’t the only federal agency looking to tighten the rules around independent contractors. The National Labor Relations Board, which referees union disputes in the private sector, issued a ruling last year that could lead to more workers being classified as employees and therefore be eligible to bargain collectively.
This story has been updated with comment from Flex.