Democratic legislative priorities like raising the minimum wage or enacting the Protecting the Right to Organize Act will face steep obstacles next year because of a divided Congress. Lacking a viable path to pass new labor and employment legislation, the Biden administration will turn to executive orders and rulemaking to expand worker protections, raise wages, and strengthen organizing rights.
Rewriting Worker Classification
Steps to redraw the boundaries between contingent workers and employees are already in motion. On Oct. 11, the Biden administration announced a new regulation that would redefine the legal test for determining who is an independent contractor.
The proposed rule lists six factors to consider that determine whether a worker should be classified as an employee or contractor:
- the worker’s opportunity for profit or loss;
- investments by the worker and the employer;
- the degree of permanence of the work relationship;
- the nature and degree of the employer’s control over the work;
- the extent to which the work performed is an integral part of the employer’s business; and
- the skill and initiative exhibited by the worker.
Weighing these factors would inform whether, under a “totality-of-the-circumstances” analysis, the worker is economically dependent on the employer or is in business for themselves. The new standard revives a version of the “economic realities test” used by courts before the Trump administration implemented a more employer-friendly rule in 2021.
Some legal analysts have compared the new regulations to California’s “ABC test,” which requires employers to meet three requirements in order to classify a worker as an independent contractor. However, the new regulation is decidedly less strict than the ABC test: Unlike the ABC test, no single factor would be dispositive.
Independent contractors are more flexible, cheaper, and less regulated than employees. Instead of paying full-time employee wages, employers can engage a contractor on an as-needed basis. Contractors aren’t covered under the FLSA and are thus not entitled to overtime and minimum-wage protections. Employers can also save costs because they don’t have to cover contractors’ health benefits.
While the rule will likely result in numerous current contractors being reclassified as employees, it’s unlikely to cause a drastic change that would abolish the “gig economy” pioneered by ride-sharing companies like Uber and Lyft. In fact, noted gig employers appear open to the proposal; a statement from Uber described the proposed regulations as a “measured approach.”
Still, business groups have voiced concern about the new standard, arguing that it creates undue costs, burdens, and confusion for employers. While litigation is likely, the proposed rule is largely a return to a tried and tested legal standard.
Barring any successful legal challenges, the new rule will tighten the independent contractor definition and make more workers eligible for the benefits of being an employee.
Boosting Pay for Exempt Employees
Employers should also expect the Biden administration to raise the minimum salary threshold for executive, administrative, and professional employees to be considered exempt from earning overtime. President Biden ran on a platform to extend overtime pay to additional workers, and the administration began taking concrete steps toward raising the salary threshold earlier this year. In June testimony before the House, Labor Secretary Marty Walsh described the current salary threshold of $35,586 ($684 per week) as “definitely” too low.
Later that month, the Department of Labor signaled that it would release draft regulations to update overtime exemptions in the fall. Although the administration apparently prioritized updates to the worker classification rule instead, employers should also get ready for the administration to raise the minimum salary threshold.
The height of the threshold remains an open question. The Obama administration previously attempted to raise the threshold to $47,476 ($913 per week), but its efforts were blocked in 2016 by a federal court. The current $35,586 threshold was set in 2019 by the Trump administration. Progressives in Congress have called on Biden to raise the threshold to above $82,000. Unsurprisingly, business groups have protested any new requirements that enforce higher wages.
To qualify under the executive, administrative, or professional exemptions to federal wage laws, employees must perform duties related to their exemption and earn a salary at or above a minimum threshold. If the minimum threshold goes up, employers will have to decide what to do with workers who continue to meet the duties test but not the salary test: Change their status and pay them for overtime, or keep them exempt by increasing their salaries. Either way, raising the salary threshold for exempt employees will raise pay for millions of workers.
Department of Labor officials are likely wary of another legal challenge; the Obama administration’s regulation was overturned because a federal judge held that its salary bump was too drastic. While an exact figure hasn’t been discussed publicly, the Biden administration will probably seek a modest adjustment in the range of the $47,476 minimum proposed six years ago under Obama.
So, even though Democrats may be unable to push a new minimum wage increase through Congress, many American workers are still in for a pay raise.
Strengthening Organized Labor
Finally, the Biden administration will flex its powers to strengthen union rights for organized labor. After campaigning to be “the most pro-union president” in US history, Biden is now facing pressure from labor groups to make good on his promise.
Executive efforts to strengthen union power began in early 2021, when the White House formed a labor task force dedicated to expanding union rights via executive order.
The task force released a report earlier this year that provided more than 60 recommendations to expand workers’ access to unions. Although proposed orders or regulations to implement the task force’s recommendations haven’t been made public, Biden is likely to announce related measures in the coming year, focusing on these issues:
Reviving the “persuader” rule. Biden will adopt a regulation from the Obama administration’s playbook that strengthens disclosure requirements for anti-union activity. Like his Democratic predecessor’s 2016 rule, which was ultimately jettisoned by the Trump administration in 2018, Biden’s measure will require businesses to disclose spending on anti-union consultants, or “persuaders,” engaged to counter employee organizing.
Ensuring workers know their rights. The White House will increase educational resources for employees seeking to organize. The task force has already launched an online resource center on unions and collective bargaining, and will increase employer notice requirements.
Stepping up enforcement. The NLRB will become more aggressive in actions against employers accused of anti-union violations. Just last month, the NLRB announced new efforts to streamline Section 10(j) relief for organizers in enforcement actions. Similar initiatives and heightened enforcement are likely.
More expansive labor proposals like allowing secondary strikes or “closed shop” unions are off the table, since they would require legislative action.
But even without Congress’s help, Biden will still be able to push through executive actions to deliver Democratic labor policies and expand workers’ rights.
Whether these actions stand up in courts will be determined in the years to come.
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