Biden administration introduces worker classification rule

WASHINGTON – The Biden administration has unveiled a new labor regulation aimed at curbing the misclassification of employees as independent contractors. This move is expected to extend federal minimum wage, health coverage, and paid sick leave protections to millions of workers in the United States.

The regulation, announced today, replaces a former guideline that was more favorable to employers in classifying workers. This change is part of the administration’s ongoing efforts to support workers’ rights and provide them with essential benefits, which they might otherwise not receive as independent contractors.

The rule is set to take effect on March 11 and outlines six criteria to determine whether a worker should be classified as an employee under the Fair Labor Standards Act. It is designed to serve as guidance for companies rather than a direct mandate to reclassify their workers.

Despite the initial concerns from the market when the proposed rules were announced in October 2022, shares of gig economy companies such as Uber (NYSE:) and Lyft (NASDAQ:) have since seen a recovery. These companies, which rely heavily on independent contractors, have been at the center of the debate over worker classification.

The U.S. Chamber of Commerce and other business groups have expressed opposition to the new regulation, warning that it could have adverse effects on worker flexibility. They are contemplating legal action to challenge the rule. Meanwhile, gig economy companies including Uber remain confident that their drivers will retain their status as contractors, despite the new criteria.

The administration’s initiative marks a significant step in addressing the complexities of the modern labor market and aims to ensure that workers receive the benefits and protections they are entitled to by law.

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