Department of Labor Proposes Law To Classify Gig Workers As Employees: What It Means For Your Side Hustle

The COVID-19 pandemic has changed the way the U.S. thinks about work overall. The immediate effects of the initial lockdown left millions of full-time working Americans instantly jobless, with little to no notice. And so, many people turned to the gig economy!

Gig work is any work that isn’t W-2 employment, hence you don’t have a set schedule, a salary, or benefits. You “work for yourself,” making the money you want on your time. Think of jobs like an Uber or Lyft driver, a DoorDash food delivery person, or an Instacart shopper (I know this first hand!).

Now, there’s a new law proposed by the Department of Labor under the Biden Administration which would classify gig workers as employees. Let’s talk about what this means for the millions of us out there and how it will affect our wallets.

What Does The New Classifying Employees Labor Law Propose?

In a nutshell, this law would be enacted to fight “employee misclassification.” Over the years as app-based services have exploded in popularity, namely Uber, Lyft, Instacart, Shipt, Grubhub, and DoorDash to name a few, so has employee misclassification.

“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 Secretary of Labor Marty Walsh. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.”

Silicon Valley giants have gotten rich with the boom of the gig economy, and yet those fueling the workforce are getting the short end of the stick.

According to FreightWaves, if passed, the new proposed rule would do the \\following:

• Not using “core factors” and instead returning to a “totality-of-the-circumstances” analysis of the economic reality test that has a refined focus on whether each factor shows the worker is economically dependent upon the employer for work versus being in business for themself.
  • To simplify: Are Uber drivers really working for themselves, or are they supporting Uber? And, should they be classified as employees rather than contractors?
• Returning the consideration of investment to a stand-alone factor, focusing on whether the worker’s investment is capital or entrepreneurial in nature, and considering the worker’s investments on a relative basis with the employer’s investment.
  • To simplify: How much money is each independent contractor spending to earn money (i.e. cost of owning or leasing a car to be an Uber or Lyft driver, for example), how much money is the employer investing in the contractor’s work on their platform, and is the money being spent by the contractor to work for themselves benefiting the contractor or the company?
• Providing additional analysis of the control factor, including detailed discussions of how scheduling, supervision, price setting, and the ability to work for others should be considered when analyzing the degree of control over a worker.
  • To simplify: What limitations can companies place upon independent contractors (i.e. limiting the number of rides, orders sent to each driver/delivery person based on how often they work, or available hours/blocks, for example) given they are “working for themselves?”
• Returning to the long-standing “departmental interpretation of the integral factor,” which considers whether the work is integral to the employer’s business rather than whether it is exclusively part of an “integrated unit of production.”
  • To simplify: Does the independent contractor’s work directly benefit each individual, or more towards the company’s bottom line?

All of this is to say that this law would be a punch in the gut to Silicon Valley’s big tech and a win for misrepresented workers. Gig workers are usually being paid less than minimum wage, and they’re working much more than 40 hours per week to earn a living wage for themselves and their families.

The Bottom Line

My take is that gig workers need more representation and rights in today’s modern economy. Being an advocate and proponent of gig work since 2017, I’m here to say that it can be hard work! And providing essential services to people, like rideshare drivers and food/grocery delivery people do each day, is integral to the functioning of the American economy, especially in a post-pandemic world.

Millions of people have chosen or resorted to earning their living wages through gig work, and these same people are the reason we have seamless ridesharing app services and easy food delivery. It’s time these workers have proper employee classification.

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