U.S. Labor Department’s New Rule is Bad News for Independent Contractors

    by Nate Scherer – policy analyst at the American Consumer Institute, for the Foundation for Economic Education (FEE)

    In what is sure to have significant implications for millions of American workers, specifically gig economy workers and contractors, the Department of Labor (DOL) issued its long-awaited final worker classification rule in January.

    The new rule revises the process to determine whether a worker is an employee or independent contractor under the Fair Labor Standards Act. The government argues the rule is necessary to ensure that all workers are provided fair wages and overtime since independent contractors (people who work for themselves or a business on a contractual basis) are not given the same benefits, such as tax withholdings and paid time off, as traditional employees. However, this argument appears designed to mask the government’s true intention, which is to reduce the number of independent contractors in the country.

    The DOL has been trying for years, at times unsuccessfully, to implement new rules that would make it more difficult for workers to be classified as contractors, believing the existing Independent Contractor Rule to be inadequate. However, that rule served an important purpose. It emphasized giving workers control over their work environment and the freedom to pursue “entrepreneurial opportunities” that best fit their needs.

    The new DOL rule waters down those provisions by requiring other economic factors to be considered equally when evaluating a worker’s classification status. In so doing, the DOL dismisses the many good reasons that a person may have for choosing to work as an independent contractor, such as desiring greater control over their work schedule and environment and the freedom to choose their clients.

    Read the entire article on FEE’s website.