The Small Business & Entrepreneurship Council (SBE Council) has issued a statement on new rules promulgated by the US Department of Labor (DOL) that may impact startups and entrepreneurs. The DOL has issued its final Independent Contractor rule today, claiming that it “helps employers and workers better understand when a worker qualifies as an employee and when they may be considered an independent contractor under the Fair Labor Standards Act.”
The new rule rescinds a previous rule established in 2021.
The new rule has been published in the Federal Register, which sets the clock for the rule to become actionable.
The US Chamber of Commerce Vice President of Workplace Policy Marc Freedman issued a statement on the final rule, slamming its harmful impact to the economy. Freedman stated:
“The Department of Labor’s new regulation redefining when someone is an employee or an independent contractor is clearly biased towards declaring most independent contractors as employees, a move that will decrease flexibility and opportunity and result in lost earning opportunities for millions of Americans. It threatens the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy. Making matters worse, the rule is completely unnecessary, as the Department continues to report success in cracking down on bad actors that are misclassifying workers. The U.S. Chamber will carefully evaluate our options going forward, including litigation.”
Karen Kerrigan, President & CEO of SBE Council, said that acting Secretary Jule Su’s “intrusive new rule” is a “massive blow” to entrepreneurs and small business owners.
“The rule is so pervasive and intrusive that almost any independent contractor can now be ‘misclassified’ and forced to be an employee by the federal government. That assumes, of course, that a business would keep that contractor as an employee once the government says they are ‘misclassified,” said Kerrigan.
The new rule incorporates a six-factor test that is described as “arbitrary” and confusing when determining if an individual is an employee or independent contractor.
“Acting Secretary Su believes that keeping in place the 2021 rule – strongly supported by entrepreneurs and small businesses – would create disruption and uncertainty for them. Actually, it’s the new rule that will create massive uncertainty, new costs, revenue loss, and loss of opportunity for independent contractors and the small businesses that tap into their expertise,” stated Kerrigan. “The new rule is an attack on the American dream of business ownership. SBE Council looks forward to working with our friends in the Congress to overturn the new rule, and our allies in the business community in support of possible litigation.”
The Final Rule on Independent Contractors may be viewed here.