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Uber Notes ‘Measured Approach’ in DOL Gig Rule Revamp Proposal

Oct. 11, 2022, 8:04 PM

While a new gig-worker test outlined by US Labor Department Tuesday makes it easier to classify workers as employees, the changes weren’t nearly as sweeping as many in the industry were anticipating, given the Biden administration’s pro-worker stance.

The proposal clarifies when workers should be classified as independent contractors or employees who are afforded the full minimum wage, overtime, and other protections provided under federal wage laws. President Joe Biden and his administration have made enforcement against worker misclassification a priority, and Democrats have called for changing the classification test DOL uses to presume that workers are employees with protections under the law, rather than contractors.

But the test proposed Tuesday “is hardly controversial,” said Richard Reibstein, co-head of Locke Lord’s independent contractor compliance and misclassification practice, who represents employers. He wrote in a blog post that the proposal “does little more” than formally rescind a business-friendly test outlined by the Trump administration and restore an approach that considers the totality of circumstances.

Timothy Taylor, who served as a deputy solicitor of labor during the Trump administration and is now an employment and litigation attorney at Holland & Knight, also wrote in an email that the regulatory text “does not contain any wild new innovations nor any carve-outs for specific types of independent contractors.”

DOL ‘Listened to Drivers’

Gig companies such as Uber Technologies Inc. and Lyft Inc., and construction, trucking, and other industries that use independent contractors to staff their fleets were watching closely for the rule, warning that their operating costs would increase exponentially if they were broadly required to reclassify their independent contractors as employees, due to the tax liabilities and minimum wage, labor, safety, and other legal requirements that apply to employees.

But one gig company expected to oppose the new approach came close to praising the proposal Tuesday.

“The Department of Labor listened to drivers, who consistently and overwhelmingly state that they prefer the unique flexibility that comes with being an independent contractor,” Uber said in a statement. The new proposal “takes a measured approach essentially returning us to the Obama era, during which our industry grew exponentially,” the company said.

In a blog post, Lyft added that “there is no immediate or direct impact on the Lyft business at this time,” as a result of the proposal.

Flex, an industry association that represents DoorDash Inc., Instacart, and other companies, said it “will ensure that the Department of Labor continues hearing the voices of these earners, and will work to ensure that any final rule protects the independence they need.”

Enforcement Efforts

The DOL proposal would rescind a test finalized by the Trump Labor Department that focused largely on how much control workers have over their job duties, and their opportunities for profit or loss when deciding whether a worker was an independent contractor or an employee.

The proposed changes from the Biden administration would instead weigh several factors involved in the working relationship equally when determining worker status, including whether the worker is an integral part of the business.

The Trump-era test was viewed as a more simplified, business-friendly approach to determining worker status, and allowed most independent contractors to remain classified that way.

But DOL officials said Tuesday that the Trump administration’s approach would result in more workers being wrongfully misclassified as independent contractors without the minimum wage and overtime protections they are owed. The Biden DOL also said the updated test was more consistent with historical judicial rulings.

Labor groups agreed, praising the Biden test as restoring “commonsense rules.”

The DOL’s announcement “will increase protections and expand benefits to so many working people who have been subjected to corporate work-arounds,” AFL-CIO President Liz Shuler said in a statement.

DOL leaders noted the rulemaking wasn’t likely to result in large worker classification changes and that the proposal isn’t intended to target any particular industry or business model. The agency also emphasized that its misclassification enforcement has been targeted toward low-wage industries, citing examples in restaurants, construction, and health care.

Last month alone, a complaint from the DOL’s Wage and Hour Division resulted in a Philadelphia health-care staffing company paying $9.3 million in back wages and liquidated damages after it misclassified more than 1,700 workers.

Nonetheless, Legal Fight Looms

Business groups have suggested they may be still willing to challenge the rule in court when it’s finalized.

Business groups were successful in getting a previous Biden administration rule on independent contractor status blocked in court earlier this year, after a federal judge found that the agency failed to consider regulatory alternatives and seek proper public input on the change.

The Coalition for Workforce Innovation, which represents Uber, Lyft, as well as the Associated Builders and Contractors and the American Trucking Associations and was part of that lawsuit, questioned why the DOL needed another rulemaking, given that the Trump administration finalized a rule on the issue in 2021.

“Returning to the older and more confusing standard does not reflect the current economy and could disrupt the livelihoods of millions of innovative, independent professionals who work in nearly every industry,” CWI Chair Evan Armstrong said in a written statement.

Similarly, the National Retail Federation added that the rulemaking was “unwarranted” and would only create more regulatory uncertainty for employers.

“This decision will only foster massive confusion, endless litigation, reduced innovation and fewer opportunities for employees and independent contractors alike,” the group said in a statement.

To contact the reporter on this story: Rebecca Rainey in Washington at rrainey@bloombergindustry.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Genevieve Douglas at gdouglas@bloomberglaw.com