What is considered freelance work is set to undergo massive changes after the Biden administration published new rules on Tuesday redefining what it means to be an independent contractor.
The new rules are meant to bring stability for Americans who rely on gig work for their main source of income. The rule applies to the Department of Labor's Fair Labor Standards Act.
The U.S. Chamber of Commerce argues that the new rules will hurt workers more than it will help.
“The Department of Labor’s new regulation redefining when someone is an employee or an independent contractor is clearly biased towards declaring most independent contractors as employees, a move that will decrease flexibility and opportunity and result in lost earning opportunities for millions of Americans," the chamber said in a statement. "It threatens the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy. Making matters worse, the rule is completely unnecessary, as the Department continues to report success in cracking down on bad actors that are misclassifying workers."
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The Chamber of Commerce says it is considering filing a lawsuit to block the rule from going into effect.
Major companies that rely on gig work have suggested the new rules won't immediately affect operations.
The new rule will use six different factors to determine whether someone is truly an independent contractor or an employee. Independent contractors generally aren't given the same protections as employees, including minimum wage and overtime pay. Unlike employees who get a W-2 who split their Social Security tax with their employer, freelance workers have to pay the full share of their Social Security tax.
“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” explained Acting Secretary of Labor Julie Su. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”
One major factor that could force businesses such as DoorDash, Instacart and Uber to reclassify their independent contractors is whether the work of freelancers is considered an "integral part of the employer’s business, and skill and initiative." One could argue many of these businesses would not be able to function without the work of independent contractors.
This is one factor, however, that could be up for legal scrutiny.
The new rules are set to go into effect March 11.
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