DOL to target companies who misclassify workers

The U.S. Department of Labor proposed a rule change designed to target employee misclassification.

The proposed rule change would rescind a Trump-era rule from 2021, and would impact a number of industries including construction, healthcare, trucking, food service and retail.

Jessica Looman, Principal Deputy Administrator at the DOL, announced the plans to protect low-wage workers from being misclassified as independent contractors. 

During the announcement, Solicitor of Labor Seema Nanda called the 2021 Independent Contractor Rule “out of sync” with how courts decided worker misclassification cases for decades.

The new proposed rule would rescind the current two-factor standard implemented by the Trump DOL. The current standard only factors the nature and degree of a worker’s control over the work and the opportunity for profit or loss based on initiative, investment or both. 

Under the new proposed rule, the DOL would use six different factors to determine worker misclassification.

  • Factor one: The opportunity for profit or loss, depending on managerial skill. 
  • Factor two: Investments by the worker and the employer. 
  • Factor three: The degree of permanence of the work relationship. 
  • Factor four: Nature and degree of control. 
  • Factor five: The extent to which the work performed is an integral part of the employer’s business. 
  • Factor six: Determined by skill and initiative. 

Looman explained the distinction between employee and independent contractor is crucial to the construction industry.

When an employer misclassifies a worker, it reduces labor costs. It prevents the worker from collecting a proper minimum wage, benefits, overtime and medical or family leave that they may be owed. 

A misclassified worker is also on the hook for paying additional taxes and workers’ compensation insurance that an employer would pay. 

Worker misclassification is a problem within the construction industry, as unscrupulous contractors oftentimes will misclassify their workers and then commit wage theft. As such, SMW Local 24 applauds the Biden Administration’s work to curtail this crime and help hard-working Americans. 

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