A proposed new rule from the Department of Labor will protect the flexibility and freedom enjoyed by gig workers and independent contractors, but it likely won’t settle the debate over how those workers should be classified.
The Labor Department’s new proposed rule, issued on September 22, is a reaction to California’s recent legislation in the other direction. Assembly Bill (A.B.) 5, a California labor law passed in 2019, imposed a three-part “ABC” test to determine if someone is an employee or an independent contractor. Essentially, unless someone can prove that they are free to not work, that they perform work outside of the course of their employers’ usual business, and that they usually work in an independent business in the same field as whomever hired them, they count as an employee.
This was a devastating blow to a whole variety of industries, from delivery and ridesharing services to journalism, photography, and even opera. Uber and Lyft nearly pulled out of California entirely and Vox Media severed ties with hundreds of freelance journalists.
The new rule “is definitely a reaction” to the California law, says Sean Higgins, a research fellow at the Competitive Enterprise Institute. The Labor Department’s proposal “goes back to the nuts and bolts of the federal definition of what a contractor is,” Higgins says, “and just sort of updates it and gives it a facelift.”
There are new considerations for determining if someone is a contractor, like whether a person can get identical work from other employers—Uber and Lyft have the same sort of work and contractors can drive for both. There’s also consideration given to whether and how individual initiative affects a worker’s compensation. The Labor Department advises “that the actual practice is more relevant than what may be contractually or theoretically possible.” It emphasizes flexibility and reasonableness.
“I think it’s a win for independent contractors,” says Patrice Onwuka, a senior policy analyst at the Independent Women’s Forum. “It would really bring clarity to what is the most basic employment question.”
Currently, the federal government doesn’t have a strict definition of what a contractor is, as opposed to an employee. Each agency and state at present “have their own test on what is an independent contractor,” according to Onwuka. It’s the courts who have been the arbiters.
The rule is being pushed through the new rule proposal process with only a 30-day public comment period, rather than the typical 60 days. “[The Department of Labor] wants to get this done now, while there is still time left on the calendar,” Higgins says.
With Election Day less than six weeks away, the Trump administration is operating on a ticking clock. Under the Congressional Review Act, Congress has 60 days following the publication of a proposed rule to issue a joint resolution to dismiss it; the Department of Labor needs to get the rule finalized before November 20 to avoid having it dismissed by a possible Democratic Senate majority in January.
Even if the Trump administration beats the clock, the rule could be rescinded or replaced by an incoming Democratic administration, leaving gig workers saddled with uncertainty.