Earlier this month, the Biden administration introduced a new regulation designed to further clamp down on employers who were misclassifying workers as independent contractors when, in the opinion of the Department of Labor, they should be classified as employees. An article by Dave Jamieson on Yahoo News stated that this regulation was meant to target employers who in some instances were trying to get out of paying benefits and following minimum wage and overtime laws. The ruling is not in place yet and is subject to a public comment period before it can be finalized and implemented.

This is to counter a ruling from the previous administration that loosened the restrictions on business, allowing for an easier classification of workers as independent contractors, which according to the Labor Department, allowed for these workers to be more easily exploited. “While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” said Labor Secretary Marty Walsh in a prepared statement.

If the law is put into place, it will be easier for workers to make their case, through lawsuits or complaints, if they believe they have been shorted on their pay, and it could impact how state governments deal with the issue as well.

According to the article, the Labor Department estimates that of the 22 million workers listed as independent contractors, up to 30 percent could be misclassified. The DOL named the construction industry, along with trucking and agriculture, as the three where the most misclassification occurred. The DOL acknowledged that minority workers were more likely to be impacted as they were more highly represented in those industries.

As stated in the article, some criteria used to define independent workers would include, “how much control they have over their schedule and work, whether they have the ability to work for other companies and how permanent the working relationship is.”

Jessica Looman, the acting head of the Labor Department’s Wage and Hour Division, stated that to be considered an independent contractor, a worker must be in business for themselves. She also stated, as reported on the legal research website beSpacific, that this new ruling would not result in huge classification changes, so much as clarify what’s already in place. 

Ongoing debate
This has been an ongoing theme in the president’s approach; earlier in the year, Jamieson reported that Biden spearheaded the repeal of a regulation, passed in the waning days of the previous administration, that would have made it more difficult for employees to file claims regarding back pay and overtime if indeed they were found to be misclassified.

According to Jamieson, worker misclassification has become a hot button of employment law and has sparked some heated debate both on the federal and state level. While some businesses claim that the independent classification allows construction workers and others freedom and flexibility, opponents counter that it’s encouraged as they have huge savings on workers compensation, insurance, and other required expenses when they are classified as employees.

A contrary opinion
One such opponent is blogger Matthew Mottola of  The Human Cloud, who writes, “This significantly hurts the long-term health and opportunities for both the US workforce and US businesses. While other countries [make it easier] to work with and be an independent contractor, the US is adding complexity and signaling it wants to get rid of the choice to work how you want.” He continues that many workers prefer to work as independent contractors and the new regulation would take away their choice in many instances.

Things to consider
Daniel Honan, of Bookkeeping For Painters, shared some points to keep in mind when classifying your workers:

Painting businesses should begin evaluating their work relationship of independent contractors to make sure they are classifying these workers correctly as independent contractors. Namely, painting businesses should evaluate state laws on worker classification and the "economic realities test" factors listed here::

• The degree of control exercised by the company over the worker
• The worker’s opportunity for profit or loss
• The permanency of the relationship between the worker and the company
• Whether the work performed is an integral part of the company’s business
• The worker’s investment in equipment or materials required for their work
• The skill and initiative required to perform the work

What are your thoughts? Feel free to post in the comments below!

Biden Cracks Down On Misclassification Of Workers As Independent Contractors (yahoo.com)

Biden Repeals Trump Rule Meant To Protect Gig Economy's 'Independent Contractor' Model | HuffPost Latest News

🚨 Emergency Update: New Worker Classification Threatens Self Employment and the Freelance Economy (substack.com)

Labor Department Moves to Change Worker Classification Rule | beSpacific