Summary
The Department of Labor (DOL) is proposing to rescind the January 2021 Independent Contractor Rule concerning employee vs. independent contractor status as it relates to the Fair Labor Standards Act (FLSA). The FLSA (among other things) guarantees a minimum hourly wage and an overtime wage premium (1.5 times the hourly wage for more than 40 hours of work in a week) to employees but not to independent contractors.
ITIF recognizes that some companies have abused independent-contractor status to deny workers certain rights and benefits codified in labor law and that these instances of misclassification should be addressed. However, ITIF is also concerned that the recission of the 2021 rule without a clearer, more modern framework to replace it threatens misclassification with respect to the fast-growing gig economy, where gig workers risk being incorrectly classified as employees rather than independent workers. This threatens the flexibility innate in online gig-economy platforms like Uber and TaskRabbit and the development of any further labor-market-related innovations. Evidence suggests that workers highly value this flexibility and would significantly cut back on their hours worked without it. Instead, the DOL should uphold the current framework while working with lawmakers to create new labor laws fitted to the modern digital economy.
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