May 9, 2021

Department of Labor Hints at Changes to Worker Classification

News from the Department of Labor (DOL) could potentially lead to updated regulations surrounding worker classification.

Most recently, Secretary of Labor Marty Walsh stated that many gig workers should be classified as employees who are entitled to benefits, and the Secretary’s work at the DOL is expected to have an impact on U.S. workplace laws and regulations. It is quite feasible that the DOL could take action on employee classification, as the current administration has been revisiting the subject much lately.

The DOL notably rescinded a rule adopted in January by the previous administration that made it easier to classify workers as independent contractors, and in March they sent a new proposal regarding independent contractor status to the White House, though the proposal was not made public

Over the past several years, there has been much debate over whether certain roles within the gig economy qualify as employment or independent contracting. This determination has implications within the property & casualty sector, including workers’ comp, as independent contractors are not entitled to benefits such as workers’ comp, disability, unemployment, and more, while employees are.

It is likely that the federal government is taking greater interest in the worker classification debate as more and more states pass their own legislation and rulings regarding worker classification. According to the National Council on Compensation Insurance (NCCI), 13 states are currently considering worker classification legislation.

West Virginia Senate Bill 272 was signed into law in March, establishing their own criteria to differentiate employees and independent contractors, and many have criticized this law, claiming it allows for the reclassification of employees as contractors who should be entitled to benefits.

And on the west coast, California’s ongoing saga regarding the gig economy has taken many turns. The state Supreme Court originally created the “ABC” test to determine criteria that would differentiate independent contractors from employees, and the criteria proved popular enough for other states to embrace it. The ABC test was later put into legislation that was enacted, but special interest groups then lobbied for a ballot initiative that created an exemption for rideshare drivers, which passed into law.

Though the DOL’s exact plans remain unknown, as more and more states embrace varying legislation, federal regulation could come soon and impact worker classification nationwide.

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