The Biden Labor Department today put out a new rule that makes it harder for workers to choose independent contractor status. Competitive Enterprise Institute labor policy expert Sean Higgins explains how the rule change will be detrimental for workers and consumers.
The Labor Department’s new worker classification is a significant step back for freelance workers, companies, and consumers, needlessly adding confusion to the employee vs. independent contractor debate. This contrasts with the previous administration’s 2021 rule, which brought clarity by focusing on two key factors for determining worker status: the worker’s control over their own working situation and whether a worker bore the economic risk associated with their own work choices.
The Biden administration’s rule expands a simple test to six vague factors, such as the work’s permanence and its importance to the employer’s business, with no decisive criteria, ultimately leaving such decisions to regulator discretion.
This change is problematic for workers seeking flexible hours, as employers may hesitate to hire contractors, fearing regulatory crackdown. Workers who thrived in the gig economy will find a useful means of earning money no longer available to them. This shift could also adversely affect consumers who value the convenience of the gig economy. Reinstating the 2021 rule would be a more sensible and just approach, aligning with economic realities and worker freedom of choice.