DOL to Unveil High-Stakes Rule on Worker Classification

The U.S. Labor Department sent a proposed rule on independent contractor status to the White House regulatory review office, setting in motion the Trump administration’s effort to complete the high-priority rulemaking by year’s end.

The regulation would determine whether a worker is an independent contractor or an employee who qualifies for minimum wage and overtime protections. DOL transmitted it Friday to the White House Office of Information and Regulatory Affairs, which will now conduct a legal and economic analysis before it can be cleared for public release.

The issue has taken on increasing legal significance with the rise of the gig economy. Business groups and companies such as Uber and Instacart are pressing for broad independent contractor classification, while unions and Democrats argue many contractors are misclassified and are employees owed enhanced workplace protections.

DOL’s Wage and Hour Division first announced in this spring’s unified regulatory agenda plans to embark on what could be a contentious initiative. Although OIRA review can sometimes last months, the agency may face pressure to expedite the process. DOL political leaders are on a mission to fast-track the worker classification regulation to finalize it by the end of 2020.

The administration wants to wrap up the rulemaking in the final months of President Donald Trump’s term in part because a Democrat could be president next year, according to current and former administration officials. Agency leadership had hoped to issue a proposed rule by now but internal discord over its legality has held up the process.

If a worker classification rule were to be proposed but not finalized and Trump doesn’t get re-elected, a new administration could easily kill the effort, or new DOL leaders inheriting the incomplete rule could finalize it by interpreting the term “employee” much more broadly than Republican regulators envisioned.

The proposal comes as the Democrat-majority House and a growing number of state legislatures have enacted bills to force businesses into reclassifying independent contractors as employees, giving them enhanced labor protections. But the Trump administration is widely expected to adopt a more employer-friendly approach via a narrower interpretation of the term employee under the Fair Labor Standards Act.