An official from the administration of U.S. President Joe Biden said that this week, the U.S. Department of Labor will release a final rule that will make it more difficult for companies to treat workers as independent contractors instead of employees.
First proposed in 2022 and likely to face legal challenges, the rule stipulates that when they are “economically dependent” on a company, workers are employees and entitled to more benefits and legal protections than contractors.
The rule, which will take effect later this year, will likely affect a range of industries, especially app-based services that rely heavily on contracts.
In response to the new rule, Marc Freedman, vice president at the U.S. Chamber of Commerce, said it would likely decrease flexibility for workers, resulting in lost opportunities to earn money.
“It is likely to threaten the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy,” he said in a statement.
During the Trump administration, workers who own their businesses or can work for competing companies, such as a driver who works for Uber and Lyft, can be treated as contractors.
According to the Biden administration, the Trump-era rule violated U.S. wage laws and was out of line with decades of federal court decisions.
Meanwhile, workers’ groups said stricter standards were required to stop some industries from misclassifying workers.
Business groups criticized the draft rule, stressing that any policy change would increase labor costs for many sectors, such as trucking, retail, and manufacturing.
According to a December survey by freelancing marketplace Upwork, some 40 percent of U.S. workers, or more than 64 million people, worked freelance during the past 12 months.
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