Labor Department’s latest rule could benefit millions of gig workers

Millions of gig economy workers and laborers, who were considered independent contractors, might become employees and enjoy company benefits under a new Labor Department rule announced on Tuesday.

What does it mean?
Set to take effect in March, the rule rescinds Trump-era regulation and revives an Obama-era test for determining employee status.

To determine employee status, it will consider factors like employer control, worker’s financial investment, job permanence, and how the worker’s job is integral to the overall business.

These criteria will make it easier for nail salon technicians, retail workers, ride-share and food-delivery workers, truckers and construction workers to gain employee status.

Labor advocates believe the new rule will protect previously ineligible workers, providing them minimum wage, overtime pay and Social Security benefits.

Legal challenges expected
Reclassifying independent contractors as employees will raise costs for various industries, especially app-based worker services like Uber, Lyft, DoorDash and Grubhub. It could lead to potential legal challenges from affected businesses.

A 2021 survey from the Pew Research Center found that 16% of Americans earned from an online gig platform at some point in their lives. These companies mostly classify the workers as independent contractors.

A 2023 analysis by the Economic Policy Institute found that a construction worker, on average, earned $16,700 less a year in income and benefits than he would as an employee.