Independent Contractors: Labor Laws Catch Up to Reality

The DOL has announced a final rule relating to independent contractors, effective March 8, 2021. As discussed in our last newsletter, many of the factors are not new; however, the DOL does lay out an economic reality test and two core factors (1) “the nature and degree of the worker’s control over the work,” and (2) “the worker’s opportunity for profit or loss.”

Meanwhile, Californians passed ballot initiative Proposition 22, which allows gig economy companies (e.g., Uber, Lyft, DoorDash) to continue classifying drivers as independent contractors. This means that the companies are not responsible for, amongst other things, health care coverage or unemployment insurance. In exchange, Proposition 22 does offer drivers a few protections, including a “wage floor” for drivers’ time (with a passenger or en route) and limited health benefits for drivers working 15+ hours per week and those injured on the job.

Business Takeaway: The saying “as California goes, so goes the nation,” indicates that we may be seeing a significant shift in labor and employment laws relative to the gig economy. After years of litigation and legislative jostling, these two recent developments suggest that real movement in well-established (though arguably outdated) labor laws is on the horizon. Contact Adam at 414-446-8800 or for more information on worker classification.