WASHINGTON—After dumping a Donald Trump scheme to harm millions of more workers by making them “independent contractors,” Democratic President Joe Biden’s Labor Department plans to go in the other direction, making it tougher for firms to misclassify workers that way and rob them of the right to organize, jobless benefits, workers comp, and—unless they pay all the taxes themselves—Social Security and Medicare.
“To both rescind” Trump’s pro-corporate scheme “and replace it with detailed regulations addressing multifactor economic reality—in a way that more fully reflects the case law and provides the flexibility needed for application to the entire economy—would be helpful for both workers and employers,” DOL said in its proposed new federal rule, published October 13.
Instead of giving more weight to one characteristic of a workers’ job over another—such as whether the worker can decide her own schedules—DOL would judge if a worker is an “employee” or an “independent contractor” based on “the totality of circumstances” on the job.
That would include not just schedules, but who sets work rules, if the firm can hire or fire the worker, pay, benefits, requirements such as driving company vehicles and using company materials, and carrying out company orders.
AFL-CIO President Liz Shuler hailed DOL’s announcement, and added Congress should go even further and write stronger worker protections into law. She vowed the Fed would keep up its drive for that goal.
The Protect the Right to Organize (PRO) Act, labor’s #1 congressional priority but stopped by a corporate-backed Senate Republican filibuster threat, would curb the bosses’ abuse of calling workers “independent contractors,” among other changes.
Republican-named judges make that even more necessary. Biden’s DOL dumped Trump’s pro-corporate independent contractor rule in March 2021, but corporate chieftains found a Republican-named federal judge in rural East Texas—their favorite area—to restore it. Biden’s proposed rule would override that decision, DOL says.
“By restoring common-sense rules to determine who is an employee, and making it harder for employers to intentionally misclassify their employees as independent contractors, the Department of Labor’s (DOL’s) announcement will increase protections and expand benefits to so many working people who have been subjected to corporate work-arounds,” Shuler said.
“Too many companies put profits over people, intentionally misclassifying their workers as contractors to avoid providing the pay, overtime, workplace rights, and benefits employees are due under labor and employment laws. This proposed rule will ensure DOL has the tools to protect employees against the current and escalating problem of misclassification. “
Misclassifying workers as “independent contractors” under federal labor law—including the minimum wage-overtime Fair Labor Standards Act and the 1935 National Labor Relations Act—is a favorite boss strategy to shortchange workers, or worse, and line corporate coffers.
Under both laws, if a workers are “employees,” they have the right to unionize, enjoy the NLRA’s protections—however weak—and qualify for the federal minimum wage, plus overtime pay if they work more than 40 hours a week.
They also come under the Social Security Act and workers’ comp laws, which force bosses to pay payroll taxes to fund all three earned benefits. Workers match employers’ payroll taxes for the first two.
But if bosses can get away with calling workers “independent contractors,” working for themselves, even when they don’t, the bosses don’t pay the taxes, don’t have to pay the minimum wage or overtime, and the workers don’t get either Social Security or Medicare unless they pay both their taxes and the bosses’ shares, too.
They’re also ineligible for workers’ comp and can’t unionize, either.
The problem, DOL said, lies in the definition of who’s an “independent contractor” and who’s an “employee.” The Trump scheme, pushed by bosses, made the independent contractor category as broad as possible. Biden’s DOL, favoring the “employees,” wants to restore the pre-Trump difference federal courts upheld for years.
“Courts rely on a broad, multifactor ‘economic reality’ analysis derived from precedent. Unlike the control-focused analysis for independent contractors applied under the common law,” and unlike what Trump proposed, “the economic reality test focuses more broadly on a worker’s economic dependence on an employer, considering the totality of the circumstances.”
“Misclassification is a serious issue that denies workers’ rights and protections under federal labor standards, promotes wage theft, allows certain employers to gain an unfair advantage over law-abiding businesses, and hurts the economy at-large,” DOL said in its press release on the proposed rule. The deadline for comments is November 28.
In its proposed rule, DOL said the Trump rule disproportionately hurts women and workers of color. It also said Trump admitted workers might lose money by being misclassified or reclassified as independent contractors, but didn’t say how much they would lose.
DOL’s notice pointed out that 8% of self-employed independent contractors earned under the $7.25 federal minimum wage—which they didn’t qualify for—and nothing for overtime. And 29% of independent contractors logged a mean of 15.4 hours of unpaid overtime per week. Meanwhile, 17% of employees, who get overtime pay, tolled a mean of 11.8 hours of OT per week.
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