Tuesday morning, the Department of Labor announced new regulations pertaining to how gig workers are classified. The battle has often taken place in the past at the state level, for example, ride share companies recently invested heavily to defeat propositions in California which would have required that drivers for Uber and Lyft be classified as traditional employees, rather than independent contractors.
The regulation will require a review period and comments will be received. The 184 page proposed regulation includes a new framework, which departs from the Trump-era test, which primarily considered 1.) the nature and degree of control over the work; and 2.) the worker’s opportunity for profit or loss. While the previous test included three other factors, those two were the primary considerations as to whether a worker can be classified as an independent contractor.
Under this test, the Eleventh Circuit ruled that an employer’s control of actions in certain instances is justified and is considered to be irrelevant under the economic reality analysis, since the primary analytical framework requires a review of the “nature and degree of the employer’s rule,” rather than a review of why said control exists. Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1316 (Eleventh Circuit 2013).
The new test purports to establish a “totality of the circumstances” review, which will include several new factors into a balancing test. The regulation states that this sort of review is well-established, as a six pronged test was established in the Supreme Court opinions Rutherford and Silk.
The new test would review the (a.) economic reality test, based upon multiple factors to form a totality of the circumstances review; and (b.) economic reality factors, such as (i.) opportunity for profit or loss depending on managerial skill, (ii.) investments by the worker and their employer, (iii.) degree of permanence of the work relationship, (iv.) nature and degree of control, (v.) extent to which the work performed is an integral part of the employer’s business, (vi.) skill and initiative, and (viii.) additional factors.
KEY TAKEAWAY
The Biden Administration’s proposed regulation represents a staunch departure from the Trump Administration era guidance. The distinction between a qualified independent contractor, and one who should be deemed a traditional employee will be all the more important, as the federal agencies are sure to take note of this sort of issue in an audit or other sort of proceeding. If and when it officially kicks in, a thorough review will surely be warranted to ensure proper compliance.