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U.S. Labor Department considers reworking employee classification

On Behalf of | Oct 17, 2022 | Employee Classification

The gig economy has exploded in popularity in recent years, with many individuals opting to be their own bosses. Indeed, according to the Pew Research Center, there were nearly 10 million gig workers in the U.S. at the end of 2021. Still, there are a few drawbacks that often come with being an independent contractor.

The U.S. Department of Labor speculates that some companies are taking advantage of gig workers. That is, businesses may be misclassifying employees as independent contractors. A recent notice of proposed rulemaking from the DOL aims to remedy the problem.

The employee label

If you have ever worked as an independent contractor, you know these roles typically come without overtime pay or even hourly minimum wages. According to reporting from CNBC, the DOL intends to implement an official rule that gives more independent contractors the employee label.

A return to the status quo

The proposed rulemaking aims to reverse a DOL rule that has existed since early 2021. It also adds a few additional requirements for companies to classify workers as independent contractors. Still, if the proposed rule becomes final, many legal professionals believe it will only facilitate a return to the status quo.

State law

When it comes to employee classification, some states have taken the lead over the federal government. California is one of these states. In fact, the Golden State requires companies to consider each of the following when classifying workers:

  • Whether the company directs or controls the individual’s work
  • Whether the individual does work that aligns with the company’s offerings
  • Whether the individual owns a business that provides services to more than one client

Ultimately, regardless of whether the DOL’s proposed rule becomes official, California’s approach ensures a greater number of workers benefit from being employees rather than independent contractors.

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