Déjà vu all over again as Trump administration move to protect freelancing

The Department of Labor has proposed a new worker classification rule to replace the previous administration’s 2024 rewrite. This new version would restore a 2021 rulemaking from the first Trump administration that protected traditional employees while preserving workers’ freedom to pursue independent contract work – i.e., freelancing – when it suited them.

App-based technology has radically changed the nature of work, enabling more people to engage in short-term gig economy jobs. Unions and their allies have responded by lobbying to change the federal regulations to legally classify most gig economy workers as traditional employees, which would aid unions seeking to organize those workers.

Critics, particularly unions, claim that the companies are misclassifying workers as contractors to circumvent federal regulations on things like health insurance and overtime, which apply primarily to traditional employees. Contractors are legally considered to be independent businesses. As it happens, contract workers are also much harder for unions to organize. The National Labor Relations Act, the law covering union organizing, mainly applies to traditional employees.

Most of these gig economy workers, however, prefer freelancing as it allows them to set their own schedules, among other advantages. Attempts to force these workers to reclassify as traditional employees have typically resulted in reduced hiring by companies and fewer workers seeking out gig jobs.

The federal government has no clear rule for determining whether a worker is an employee or a contractor. Until 2021, regulators used a six-factor test to indicate whether a worker might be an employee, but none of the factors was considered definitive. These factors included questionable details such as whether the worker primarily relied on gig work for income and the level of skill required.

The first Trump administration updated the definition of contractor work in a sensible way, narrowing the factors to two: the degree of control a worker has over the work and whether they take on the risk for profit or loss from it. The Biden administration rolled that rulemaking back, even expanding the list of potential factors, making determinations even more subjective. The current Trump administration proposes to effectively reinstate its 2021 rule.

Restoring the Trump administration rule is a good step, but the rulemaking process takes months. The rule’s repeated reversal with each change of administration creates uncertainty for both workers and employers. There’s every reason to think that the next Democratic administration, when it takes office, will once more re-write the rule to benefit unions.

Congress should take up legislation to codify a sensible standard that protects gig economy workers and settles the issue for good. Legislation to that effect, the Employee Rights Act, has been introduced and deserves congressional consideration.