In their effort to control more of our lives, the Biden administration has chosen to change the rules on determining if people are considered employees or self-employed - and it could cost businesses massive amounts of money that have been employing people as independent contractors.
Under the proposed new rules, to determine a worker’s status, the Biden administration will use a "multi-factor economic realities test" that considers factors of the working relationship to determine whether the worker is really in business for themselves. The proposed changes would be a return to a “totality-of-the-circumstances” analysis, according to the proposal, evaluating all of the factors involved in the working relationship equally.
This would also rescind a Trump-era rule that outlined a similar multi-factor test, but that gave greater weight to how much control workers have over their job duties and their opportunities for profit or loss when determining whether a worker is an employee or an independent contractor - which it should.
Biden DOL officials claim the simpler Trump independent contractor test is inconsistent with federal court decisions, which would result in more workers being misclassified as independent contractors instead of be employees (which would produce more tax revenue).
The Trump test had five factors, with two given far greater weight: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment. Basically, whether the worker controlled how and when the work was done or was it controlled by the business paying for the services.
The new Biden proposal would consider those two factors and four others: investments by the worker and the employer, the degree of permanence of the working relationship, the extent to which the work performed is an integral part of the employer’s business, and the degree of skill and initiative exhibited by the worker. The DOL may also consider “additional factors” beyond those six, if they indicate the worker may be in business for themselves, according to the proposal.
The problem I find with these additional factors is that to a large extent, the decisions can tend to be subjective and the last thing we need is government employees being able to interpret the rules based on their personal biases. We have too much of that already.
The Labor Department couldn’t be definitive on the proposal’s impact because it “does not have data on the number of misclassified workers and because there are inherent challenges in determining the extent to which the rule would reduce this misclassification.” Of coarse not. The DOL estimates this rule change would cost affected companies, independent contractors, and local governments $188.3 million. Considering how they have already screwed up the economy, this is the last thing this country needs.
This is the second time the DOL has tried to rescind the IC rule created by the Trump administration, which made it easier for businesses to classify workers as independent contractors.
The Trump standard was reinstated after a federal court in Texas ruled in March that the DOL failed to consider meaningful policy alternatives before revoking the rule. So, the Biden administration decided to begin a different course to see if it would fly this time.
The proposal quickly drew criticism from business groups, and likely will spark legal challenges when it’s made final. The National Retail Federation “staunchly opposes a change in this important area of law, which is both unwarranted and unnecessary,” the group said in a statement. “This decision will only foster massive confusion, endless litigation, reduced innovation and fewer opportunities for employees and independent contractors alike.”
Michael Lotito, co-chair of Littler Mendelson PC’s Workplace Policy Institute, also said the proposal fails to explain why the current Trump rule has impeded the agency’s ability to police misclassification.
“Without the discussion of how the rule has failed, I don’t know how you can justify a new rule,” Lotito said.
Since the Trump rule was reinstated, the DOL’s wage enforcement arm has touted at least seven cases that collectively found more than 2,500 workers who were wrongly labeled as independent contractors when they should have been classified as employees.
Those rules seem to be working, so why do they need to change them? Which returns me to my original thought: I can only think that it is to give more government control over our lives.