Since the start of the “gig” economy, there has been a fight over whether workers for companies like Uber, Lyft and Doordash are employees or independent contractors. The companies argue that their workers are independent contractors, which allows them to avoid requirements like a minimum wage, overtime, contribution to Unemployment Insurance and payment of a portion of a worker’s Social Security taxes. Classification of a worker as an independent contractor also potentially allows an employer to avoid workers’ compensation claims when a worker is injured.
While several states (including New York) have tried to pass laws giving gig workers employee status, to date, the federal government has only addressed the issue of entitlement to Unemployment Insurance for Uber and Lyft drivers. However, the Biden Administration recently made a proposal that would make it harder for companies to classify gig workers as independent contractors. The proposal involves a test that would lower the current bar for considering whether a worker is an employee. The test considers:
How much control workers have over how to do their job, and
How much opportunity workers have to increase their earnings by offering new services.
If the worker has little control over these factors, then they would be considered an employee. Studies have shown that freelancers using an online platform (like Uber and Lyft) generally have less control over the contractual terms of their work. If this proposal is passed, it will only apply to laws that the Department of Labor enforces, such as the Federal Minimum Wage. But it will likely have an impact on individual employers when they make employee classification decisions, as well as judges who must determine whether a worker is an employee or an independent contractor.