Change is afoot for the gig economy. On Tuesday, the U.S. Labor Department issued its final rule to require companies to reclassify some independent contractors as employees.
This seemingly small tweak in verbiage makes a big difference in how a company can treat its employees. The classification will depend on whether or not the worker is “economically dependent” on the company.
Workers Rights and Potential Effects
Most federal and state laws require companies to pay a minimum wage and overtime pay. But this rule only applies to a company’s employees, not independent contractors. The new rule is intended to secure more rights for workers who are currently full-time independent contractors.
The change could bump up company expenses, affect their business models, and lead to higher costs being passed down to end consumers. For workers, the reclassification could also lead to being deprived of other perks, such as flexible schedules, as companies are trying to make up for the increased costs.
Major gig economy players Uber (UBER), Lyft (LYFT), and DoorDash (DASH) have expressed concerns about the new rule but don’t expect this law to impact their businesses. Nevertheless, trade groups and gig economy companies are expected to challenge the new ruling.
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