The Biden administration’s recent labor rule, set to take effect on March 11, is expected to raise costs for employers and curtail the freedom of Americans to choose their work arrangements, according to experts interviewed by the Daily Caller News Foundation.
The Department of Labor’s new rule reclassifies many workers, previously considered independent contractors, as company employees under the Fair Labor Standards Act (FLSA) of 1938. This reclassification entitles them to benefits such as overtime pay and a minimum wage. However, critics argue that the rule may hinder the flexibility offered by freelancing positions and potentially lead to job losses, particularly impacting the gig economy.
The FLSA aims to ensure that labor conditions do not compromise the minimum standard of living necessary for workers’ well-being. Under federal law, employees are entitled to minimum wage and overtime pay, while independent contractors are not.
The new rule assesses whether workers are “economically dependent” on their employers to determine their employment status. This means that individuals relying on their job but opting for the flexibility of freelancing could be reclassified as employees or face termination. The criteria differ from those established in January 2021 under the Trump administration, which considered factors like the level of control over the work and the worker’s opportunity for profit or loss.
Proponents argue that the change will combat abuse from companies using freelance labor to evade paying workers for all hours or paying below minimum wage. However, critics, including Sean Higgins from the Competitive Enterprise Institute, express concerns about the potential impact on freelancers, businesses, and the economy.
Retaining employees is estimated to cost 30% more compared to an independent contractor model, given the mandatory benefits. Approximately 40% of the total U.S. labor force, or 64 million people, engaged in some form of freelance work in the past 12 months.
The new rule has similarities to California’s AB 5, which faced criticism for causing job cuts among independent contractors. Critics argue that the Biden administration’s labor rule constitutes a challenge to the independent contractor model, limiting working Americans’ flexibility.
While the DOL aims to address potential abuse, critics fear the rule may hinder economic growth, lead to job losses, and negatively impact freelancers, particularly those seeking flexible work arrangements. The long-term consequences of this rule change remain a subject of debate.
