Changes to the Gig-Contractor Rule: Biden Administration Poised to Freeze New Rule From Taking Effect

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The Department of Labor on January 7, 2021 posted a final rule regarding the classification of so-called “gig contractors.”  The final rule is set to take effect on March 8, 2021. A big question mark looms over whether this rule will actually take effect. The incoming Biden administration, as most incoming administrations have done, intends to freeze all pending regulations which have yet to take effect.

The Fair Labor Standards Act (“FLSA”), generally allows for workers to perform services for an individual or entity as an independent contractor. This classification exempts the independent contractor from minimum wage, overtime, or record keeping requirements.

In a flurry of orders in the waning days of the Trump administration, a new rule has been proposed to change the way independent contractors are classified. The final rule focuses on “economic dependence” in determining whether a contractor is independent. Reading between the lines, the final rule seeks to strengthen an entity’s ability to classify its workforce as independent contractors.

What does this mean for this rule going forward? We will have to wait and see how the Department of Labor under the new Biden administration handles these pending rules. Reading the tea leaves, it is hard to imagine this rule taking effect in its current form.

Looking to the growth of companies like Uber, DoorDash, GrubHub, and the like, the use of gig-contractors is growing. We can expect the Biden administration to wade into the classification and use of independent contractors. We can expect a more individual worker focus coming from the Biden team.

What this looks like, we will have to wait and see. What is clear, is a new regulatory framework is coming to worker classifications. For instance, is the Biden administration going to allow companies to classify employees as independent, while deriving the overwhelming majority of its profits from the use of them?

We will keep an eye on Washington, and update our blog once a final decision on this pending rule is made. Until then bookmark this rule, but be prepared for a new rule to take its place once the dust settles.

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