Retail group opposes proposed change in independent contractor status
A proposed rule from the U.S. Department the Labor would change the requirements for whether a worker is classified as an independent contractor or an employee under federal law.
The proposal clarifies when workers should be classified as independent contractors, or as employees who are afforded the full minimum wage, overtime, and other protections provided under the Fair Labor Standards Act. It would use a multi-factor economic realities test that considers factors of the working relationship to determine whether the worker is truly in business for themselves, reported Bloomberg Law.
The proposed changes would be a return to a “totality-of-the-circumstances” analysis, evaluating all the factors involved in the working relationship equally. It would rescind a Trump-era rule that outlined a similar multi-factor test, but that gave greater weight to how much control workers have over their job duties and their opportunities for profit or loss when determining whether a worker is an employee or an independent contractor, according to Bloomberg Law.
In a statement, DOL said that it often sees employers misclassify their employees as contractors, particularly among the “most vulnerable workers.” Misclassification denies basic worker protections, such as minimum wage and overtime pay and affects a wide range of workers in the home care, janitorial services, trucking, delivery, construction, personal services, and hospitality and restaurant industries, among others, according to the DOL.
“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages,” said Secretary of Labor Marty Walsh.
The National Retail Federation said it staunchly opposes the proposed change, calling it both unwarranted and unnecessary.
“The modern workplace is more complex in the wake of the COVID-19 pandemic,”said NRF senior VP of government relations David French. “Retailers, along with countless other employers, maintain a wide range of business relationships with independent contractors, including billing, facility maintenance, data analysis, delivery, marketing and other critical services.”
The current rules clearly define the difference between employees and independent contractors, providing much-needed legal certainty for employers, employees and independent contractors alike, French added.
“The changes being proposed by the Labor Department will significantly increase costs for businesses across all industries, and further drive already rampant inflation,” French said. “This decision will only foster massive confusion, endless litigation, reduced innovation and fewer opportunities for employees and independent contractors alike.”