Labor Department Independent Contractor Rule out Today

The Department of Labor (DOL) acted to promote entrepreneurialism and protect freelancers on Wednesday by issuing a new rule under the Fair Labor Standards Act (FLSA) that clarifies when a person is a either traditional employee or an independent contractor. The department did this because that’s what those workers asked for.

The DOL’s announcement is a big deal because it addresses whether so-called gig economy companies can continue to classify most of their workers as contractors. The companies, such as app-based rideshare businesses Uber and Lyft, argue that the flexibility of contract work is crucial to their operations. The DOL’s rule will allow them to carry on in most cases.

Specifically, the rule says whether a person is a contractor is based on two factors:  The individual’s degree or control over the work and his or her ability to profit or loss from it. Previously, the government used as many as six vaguely defined factors that allowed virtually any work to be defined as employment.

Liberal lawmakers and especially labor unions criticized the department rule when it was first proposed and again today. They claim it protects corporations by undermining the rights that workers are guaranteed under laws like the FLSA.

Thankfully, rather than only listen to groups that claim to speak on behalf of workers, the department opted to also pay attention to what the workers themselves thought. It seems they had a different take on whether they were being exploited.

The “overwhelming majority” of comments it received from traditional freelancers such as translators, journalists, consultants, and musicians supported the department’s rule, the department noted in the Federal Register announcement. Uber drivers in particular submitted over 900 comments.  “[T]he majority of these drivers who addressed the [proposed rule] supported the Department’s proposal,” it found.

Uber drivers repeatedly said they didn’t want to be traditional employees. Being tied to one job with a set schedule—f ederal law requires employers track and control their workers’ hours—was precisely what they were trying to avoid:

“Have driven with Uber for 2 years, as a part-time driver. As a retired individual I find Uber provides a great opportunity to earn a little extra income, without the typical demands of a traditional ‘job,’” opined one James Malley.

“Working with Uber as a second side-hustle job has allowed me to get up very early in the morning before my main job and make an additional income that helps my cashflow. That flexibility and independence to work when and how I want to [are] very important to me,” explained David Keese.

“I drive Uber when I don’t work my school job as a special ed aide. I have 2 kids in college and Uber allows me to drive when I can so I can earn extra dollars to pay for those college books. It also helps pay for extras on vacations, or new tires for one of the 4 vehicles we have. If we went to a set schedule, I would not be able to drive. A 2nd job isn’t a possibility for me, as I’ve tried that before,” remarked Crystal Slaughter.

None of this should be too surprising. Whenever given the chance, workers have rejected efforts to turn their side hustles into full-time jobs.

California lawmakers passed the state’s AB5 law at the behest of unions to force companies like Lyft and Uber to classify their drivers as employees. Golden State voters responded last fall by approving Proposition 22, undoing the main part of the law. That was after state lawmakers scrambled to amend the law to exclude numerous traditional freelance workers, like musicians and photographers, whose careers had been disrupted by it.  

Deputy Secretary of Labor Patrick Pizzella told reporters Wednesday that department’s intention with the rule was to “respect the time-honored tradition of being your own boss.”

It’s good to know that at least some people in the government listen to their bosses, the American people.