Labor Dept rule on independent contractors likely to land as early as Tuesday – sources

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By Nandita Bose

WASHINGTON (Reuters) – A proposed Department of Labor rule defining whether workers for rideshare, retail and delivery companies are misidentified as independent contractors is expected to be released as early as Tuesday, two sources with knowledge of the matter said.

Details of the new rule have not been made public. But the department is expected to model it on legal guidance that says people economically dependent on a company are employees, or go further to expand the pool of workers who should receive benefits, legal experts have said.

The Labor Department has scheduled a news conference at 9:30 am ET on Tuesday with Solicitor of Labor Seema Nanda and Principal Deputy Wage and Hour Administrator Jessica Looman but has not offered any details on what they will discuss.

The Labor Department and the White House declined to comment.

The White House’s Office of Information and Regulatory Affairs (OIRA) completed a review of the rule on Sept. 29, according to White House records.

Tim Taylor, a litigation attorney and partner at Holland & Knight, who had served as deputy solicitor at the Labor Department, said rules typically are cleared in three weeks to a month, but the independent contractor rule was with White House’s OIRA for about three months.

He said the lengthy review period at the White House suggests that the rule proposed by the Labor Department is either long and complex or that the White House wanted something different than what the department proposed.

“And typically when that happens it is because the White House wants something more aggressive,” he said.

Reuters recently reported that groups representing employers had been trying, and failing, to convince a labor-friendly White House that any broad rule would hurt workers who want to remain independent and have flexibility.

More than one-third of U.S. workers, or nearly 60 million people, performed some sort of freelance work in the past 12 months, a December 2021 survey by freelancing marketplace Upwork (NASDAQ:) showed.

Broadly defining independent contractors as employees would force companies to pay benefits, such as overtime pay and health, that hurt their bottom line. Employers can save about 30% by skipping payroll taxes and unemployment and benefit costs, workers’ groups estimate.

During separate meetings with the White House to discuss the rule, several worker groups argued a growing number of companies, including in health care, are misclassifying hundreds of thousands of workers. These workers are often left without social safety nets, accident coverage or paid sick leave, and are squeezed by high gas prices, they said.

This is President Joe Biden’s second stab at resetting rules about how employees can be defined. A federal judge in Texas ruled in March that the Biden administration, which had withdrawn a Trump-era rule that favored business groups on the issue, had not followed proper procedure.

The proposed rule will be open to public comment before the Labor Department issues a final rule, which companies are expected to quickly challenge in court.

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