Biden administration issues rule that could curb 'gig' work, contracting

The U.S. Department of Labor on Tuesday issued a final rule that will force companies to treat some workers as employees rather than less expensive independent contractors, in a move that has riled business groups and will likely prompt legal challenges.

The rule is widely expected to increase labor costs for industries that rely on contract labor or freelancers, such as trucking, manufacturing, healthcare and app-based "gig" services.

Most federal and state labor laws, such as those requiring a minimum wage and overtime pay, apply only to a company's employees. Studies suggest that employees can cost companies up to 30% more than independent contractors.

The rule will require that workers be considered employees rather than contractors when they are "economically dependent" on a company. It does not go as far as wage laws in California and other states that place even greater limitations on independent contracting.

It replaces a regulation by Republican former President Donald Trump's administration that had made it easier to classify workers as independent contractors. The new rule is likely to be challenged in court by trade groups and businesses.

Under the Trump era rule, workers who owned their own businesses or had the ability to work for competing companies, such as a driver who works for both Uber Technologies and Lyft, could be treated as contractors.

The new rule is set to take effect on March 11.

Acting U.S. Labor Secretary Julie Su during a call with reporters on Monday said the misclassification of workers as contractors rather than employees particularly harms low-income workers who would benefit the most from legal protections afforded to employees such as a minimum wage and unemployment insurance.

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