The U.S. Department of Labor issued its final ruling Tuesday on what constitutes full-time worker status under the Fair Labor Standards Act, a rule that will impact delivery drivers and gig workers across the country.
The ruling aims to clarify misclassifications of worker status, an issue the Labor Department described as “a serious problem that impacts workers’ rights to minimum wage and overtime pay, facilitates wage theft, allows some employers to undercut their law-abiding competition and hurts the economy at large.”
“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” Acting Secretary of Labor Julie Su said in a press release. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”
The final rule, which goes into effect on March 11, rescinds an Independent Contractor Rule from 2021, which limited factors that could be considered when determining worker status, such as its prohibition on “considering whether the work performed is central or important to the potential employer’s business.”
The Labor Department released a guidance noting that the final rule stipulates that workers are not independent contractors “if they are, as matter of economic reality, economically dependent on an employer for work. The new rule includes six factors to consider:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and the potential employer
- Degree of permanence of the work relationship
- Nature and degree of control
- Extent to which the work performed is an integral part of the potential employer’s business
- skill and initiative
The rule also includes a guidance on the application of these six factors.
The announcement prompted responses from companies like DoorDash, which employs thousands of delivery drivers, and organizations like the National Retail Federation (NRF).
The NRF said in a press release on Tuesday that the organization opposes the new guidance, saying the new rule is unnecessary in the modern workplace.
“The administration is repealing common-sense rules that clearly articulate the difference between employees and independent contractors. NRF vehemently opposes a change in this important area of law, which is both unwarranted and unnecessary. This decision will only foster confusion, endless litigation and reduced innovation,” said David French, senior vice president of government relations for NRF, in a statement. “As bad as this rule is for retailers specifically and employers generally, it is far worse for the millions of workers nationwide who cherish the opportunity to engage in independent work.”
While the new rules particularly target workers such as delivery drivers and others, San Francisco-based delivery company DoorDash released a statement saying the new rule is unlikely to affect its classification of its delivery drivers, known as Dashers, as independent contractors.
“Millions of Americans choose to (deliver for DoorDash) precisely because they want an option to work independently and differently from employment. The vast majority of Dashers already have a full- or part-time job or are primary caregivers, students, self-employed, or retired,” the company said in a press release.
“That’s why they’re not looking for the structure, shifts, and hour demands of employment. In fact, the average time Dashers spend on delivery across the U.S. is less than four hours per week, and 90% of all Dashers average less than 10 hours per week on delivery. It’s no surprise that an overwhelming majority of Dashers prefer to remain independent contractors.”
