Labor department moves to protect gig workers

Independent contractors notched a win as the U.S. Department of Labor (DoL) this month announced the withdrawal of the “Independent Contractor Rule.” The rule, which was issued two weeks before the change in presidential administrations, would have made it easier for employers to classify workers as independent contractors and would have provided employers more security from challenges by contract workers for minimum wages and overtime pay. In withdrawing the rule, DoL said workers would have lost Fair Labor Standards Act (FLSA) protections.  And while the number of independent contractors rose during the pandemic, a recent story from the Rockefeller Institute of Government sheds light on how little is known about the real number of gig workers.

“Legitimate business owners play an important role in our economy but, too often, workers lose important wage and related protections when employers misclassify them as independent contractors,” U.S. Secretary of Labor Marty Walsh said in a DoL press release. “We remain committed to ensuring that employees are recognized clearly and correctly when they are, in fact, employees so that they receive the protections the Fair Labor Standards Act provides.”

The issue can be contentious. In November last year, California voters approved a ballot initiative that permits companies to continue treating app-based ride-share and delivery drivers as independent contractors rather than employees, under which designation they would be entitled to wage and labor protections. Uber, Doordash and Lyft were among the companies that ran a $200 million campaign to convince voters to approve the measure.

The Rockefeller story notes that the CARES Act expanded unemployment insurance benefits to independent contractors, a group of workers that state unemployment agencies weren’t designed to handle. And now, a year later, Rockefeller poses the question whether this portion of the workforce should permanently be included in the safety net.

Gig workers were in a snag when many who may have earned income from different sources wouldn’t have had corresponding tax documentation to file the pandemic unemployment assistance claim. And, the report says, it quickly became clear that the size of the gig economy wasn’t clear.

Some states have responded by requiring gig workers to report earnings through a state 1099-K form, with five states adding to the seven that already required it. And the American Rescue Plan at the federal level lowered the 1099-K reporting threshold to $600 annually and eliminated the transaction minimum, the story explains. If the unemployment benefit were made permanent, states would have to find a way to fund it since the unemployment tax is funded by employers. To tackle those questions, a change in employment could be necessary and may be addressed once the current crisis is over.