On May 5, the U.S. Department of Labor withdrew its prior rule on the classification of independent contractors. The prior rule from the Trump administration had made it easier for businesses to classify workers as independent contractors, rather than employees. The Department of Labor’s wage and hour division announced the withdrawal of the existing rule, which became effective upon its publication on May 6. The announcement can be accessed at //public-inspection.federalregister.gov/2021-09518.pdf.
The proper classification of workers is a critical issue for any business. Lawsuits alleging that businesses have “misclassified” employees as contractors are very common, especially in south Florida. These lawsuits often seek lost wages for overtime hours and health benefits. This legal issue has gained even more attention given the rise in workers in the in the so-called “gig economy” that includes freelance or temporary workers who perform services such as making deliveries, writing online content, completing short-term projects and coding software. In the last few years, the gig economy has exploded with the proliferation of smartphone apps such as Uber and Lyft for ridesharing transportation, DoorDash and Grubhub for food delivery, Instacart and Shipt for grocery and item delivery, and Thumbtack for home cleaning and repairs. The use of these on-demand contactless services skyrocketed during the COVID-19 pandemic and greatly expanded the number of freelance workers in the U.S. economy. Additionally, due to the uncertainty of future demand for a variety of products and services, businesses in a variety of industries have looked to reduce their expenses by using temporary independent contractors for projects traditionally performed by full-time employees. Employee rights advocates and progressives have argued that these workers should receive all of the benefits of being employees. On the other hand, business groups, and even some independent contractors, contend that the contracting relationship allows for greater flexibility and independence for the worker while reducing the financial burden on the business.