(CN) — A U.S. Labor Department regulation that takes effect on March 11 could require many businesses that treat workers as independent contractors to start paying them as employees — although it’s still unclear how much of a difference it will make in practice.
The new rule is 339 pages long and is so complicated and hard to apply that “employers will never know whether they got it right unless they say someone is an employee,” said Marc Freedman, vice president for employment policy at the U.S. Chamber of Commerce.
Freedman said the new rule is “blatant in trying to tilt the analysis toward finding an employment relationship.”
Evan Barouh, a law professor at St. John’s University who worked for the Labor Department under President Obama, agrees. The department’s goal is “to cast as wide a net as possible for workers to be employees and try to make it difficult for employers to avoid paying overtime,” he said.
“It’s going to make it tougher for businesses,” added Irv Miljoner, a former director of the Labor Department’s wage-and-hour division on Long Island.
But “I don’t think anything will change at all,” countered Mark Hanna of Murphy Anderson in Washington, who is vice president for public policy at the National Employment Lawyers Association, an employee-rights group.
“In most situations, there will be no difference,” he said. “There might be some guidance on tough calls, but most misclassification is blatant wage theft and won’t be affected.”
Disputes over employee status have been in the news recently at online “gig” companies such as Uber, Lyft and DoorDash, but the greatest effect of the new regulation could be on sole proprietors who do the bulk of their work for one client, Freedman said.
Examples include salespeople, marketing consultants, web designers, event planners, travel agents, grant writers, accountants, journalists, copyeditors, proofreaders, repossessors, underwriters, auditors, actuaries, psychologists, private investigators, interpreters, commercial fishermen, newspaper carriers and caddies.
A lot of construction companies try to claim that their workers are independent contractors, according to Miljoner, and the issue also comes up frequently with truck drivers, landscapers, security guards and health care workers.
Other workers who could be affected are those who sign up with an agency for temporary assignments with different employers. Barouh handled a case involving a hospital nurse registry in which many of the nurses wanted to be considered contractors but the government forced them to be treated as employees instead.
He also cited cases where a strip club tried to claim that its dancers were contractors and where a hair salon declared that its stylists were freelancers and then “rented them a chair.”
In California, which adopted the strictest test in the country for employee status in 2020, many businesses simply eliminated freelancers altogether rather than treat them as full-fledged employees, according to Freedman, who cited a George Mason University study that showed significant job losses in the state.
At least one lawsuit has already been filed to invalidate the Labor Department rule and more are expected. Republican Representative Kevin Kiley of California, chair of a House worker-protection subcommittee, and Republican Senator Bill Cassidy of Louisiana, ranking member of the Senate’s labor committee, announced plans to try to repeal it in Congress.
Kiley called the regulation a “nationwide attack on the American workforce.” Cassidy said it “dismantles the gig economy and jeopardizes the ability of 27 million Americans to work as independent contractors.”
At issue is the 1938 Fair Labor Standards Act, or FLSA, the federal law that requires employees — but not contractors — to be paid minimum wage and overtime. The law wasn’t very clear in distinguishing employees and contractors, and over the years the federal appeals courts have come up with a number of tests.
