Biden administration rescinds Trump gig-worker rule

The Labor Department on Wednesday announced the withdrawal of the Trump-era independent contractor rule that allowed businesses to classify workers as independent contractors as opposed to employees.

The administration’s move, effective Thursday, allows for workers considered “gig workers” to have minimum wage and overtime compensation protections under the Fair Labor Standards Act (FLSA). Employee classification has major implications for companies like Uber, Lyft and DoorDash, which depend on gig workers.

“By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” Labor Secretary Marty Walsh said in a statement. “Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors.” 

The department said it is withdrawing the rule for “several reasons,” including that it was in tension with the FLSA, it undermined the approach “of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship” and it led to workers losing FLSA protections. 

Companies that rely on gig workers poured $200 million into overturning a ballot measure to reclassify drivers as employees in California and have united against the PRO Act, which would make it far easier for gig workers and other independent contractors to unionize and bargain collectively.

Walsh last week said that “in a lot of cases” gig workers should be full employees rather than independent contractors, which marked the first time he had weighed in on the debate over the classification of these workers.

“We are looking at it but in a lot of cases gig workers should be classified as employees,” Walsh said in an interview with Reuters.

A spokesperson for the Labor Department confirmed his comments and elaborated by saying: “The Secretary was reiterating that misclassification is a pervasive issue that impacts both the economy and workers. Worker protections under federal law create a safety net of security and benefits that provide ladders of opportunity into the middle class. This safety net should be further strengthened.”