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Labor Department Proposes Rule To Grant Gig Workers Employee Status

On Tuesday, the Labor Department revealed a new proposal that would make it harder for companies to classify workers as independent contractors rather than employees. This rule would impact the on-demand economy, which includes companies like Uber and Lyft.

Workers granted employee status qualify for benefits and protections like paid leave, minimum wage and overtime pay. Employers would also have to contribute to a portion of worker Social Security taxes and unemployment insurance.

Labor Secretary Marty Walsh spoke about the significance of the proposed rule in a prepared statement.

“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers. Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.”

Labor Unions have long urged the Biden administration to scrutinize industries that rely on contractors, including app-based ride services, food delivery services or freelance task platforms like Handy, which connects customers with house cleaners and other home-improvement specialists.

Fair labor advocates stress that gig economy workers face more barriers to unionizing and cannot take advantage of essential benefits afforded to workers classified as employees.

The Labor Department said this misclassification is rampant in several industries, including home care, janitorial services, delivery, trucking and construction services. The misclassification also makes it difficult for businesses to compete with those that misclassify workers as contractors by promoting wage theft.

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The proposed rule is a test that determines whether a worker who is economically dependent on a company should have contractor or employee status. It takes into account factors such as the level of control workers have over how they do their jobs or how many new opportunities they have to increase their earnings by offering new services. Workers who have limited control over either are deemed employees. The rule also requires employers to consider if an employee’s work is an integral part of their business.

It is important to note that the rule is interpretive and does not have the legal force of a congressionally approved regulation. It also only applies to laws the Department of Labor enforces, such as the federal minimum wage. State agencies and other federal agencies like the IRS would still be able to use their own criteria for employment status.

However, employers and regulators will likely consider the proposed rule as guidance for deciding on how to classify workers. Judges will also likely look to the test as a guide.

Patricia Campos-Medina, executive director of the Worker Institute at Cornell University’s School of Industrial and Labor Relations, considers this new move from the Biden administration a big step.

“This is a long-awaited determination that will empower essential workers to assert their basic wage and hour, health and safety and compensation rights. All workers are entitled to these rights, but employers easily avoid them by making arbitrary decisions on independent contractor rules.”

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The Biden administration’s rule would replace the Trump administration’s guidance on worker classification. The previous administration’s guidance made it easier for companies to misclassify workers as contractors. The new proposal will likely face opposition from businesses and organizations that supported the previous rule.

According to The Hill, Uber and Lyft stocks fell around 14% after the announcement. The new proposal could also increase labor costs for gig-based companies by about 30%.

CR Wooters, head of federal affairs at Uber, claimed this does not imply an inevitable negative outcome for the company.

“Today’s proposed rule takes a measured approach, essentially returning us to the Obama era, during which our industry grew exponentially.”

Record-Breaking 4.5 Million US Workers Quit Their Jobs In November 

According to the US Department of Labor, a record-breaking number of employees quit their jobs in November while the total amount of employment openings continued to drop, the department reported this Tuesday. 

Around 4.53 million Americans resigned from their jobs throughout the month of November, according to the DOL’s Job Openings and Labor Turnover Survey. This marks an 8.9% increase in resignations when compared to October. The data also shows November beating September’s record of resignations, which peaked at 4.36 million. 

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The recent months of Americans resigning has been labelled as the Great Resignation. Workers have been leaving their positions for a multitude of reasons, including not enough pay/benefits, lack of health and safety precautions, and increased mobility in the labor market. Job openings in America currently outnumber the amount of citizens looking for work. 

In October there were around 11.09 million job openings throughout the nation, and around 10.56 million in November. This time last year the job opening rate was around 4.5%, and has since increased to 6.6%. 

“The Great Resignation shows no sign of abating, with quits hitting a new record. The question is why, and the answers are for starkly different reasons,” said Robert Frick, corporate economist at Navy Federal Credit Union. 

“COVID-19 burnout and fear are continuing, but also, many Americans have the confidence to quit given the high level of job openings and rising pay.”

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A separate economic report from the ISM Manufacturing Index showed that manufacturing rates throughout December were slower than initially expected. The index registered a 58.7% rate, 1.3% lower than the 60% expectation. 

The index also showed major decreases in supplier delivery, which fell by 7.3% last month. While inflation in general is running at its highest level in nearly 40 years, the index also showed a shocking decrease in prices; 14.2%.

The employment index within manufacturing, however, has shown a .9% gain in employment, which is a sign that hiring within the sector is remaining relatively strong. 

As Covid cases continue to surge, the healthcare and social assistance industries are experiencing some of the highest levels of resignation, with a 3% rise in November, the highest percentage on record for that sector. 

The Labor Department is expected to release their closely watched nonfarm payroll count for December within the week. Experts in the field are expecting, and hoping, to see a growth of around 422,000 jobs with an unemployment rate of 4.1%.

One Year Since The Covid-19 Pandemic Began And America Is Still Down 10 Million Jobs 

Nearly one year after the Covid-19 pandemic initially shut down America the nation is still finding itself down by 10 million jobs compared to where we were at this time last year. 745,000 additional Americans have filed for first-time unemployment benefits on a seasonally adjusted basis last week, according to the US Labor Department. 

The number of new claims is up from the previous week, however, it’s slightly less than what economists were expecting for the month of March. 436,696 workers also applied for Pandemic Unemployment benefits which are mainly available for gig workers or self-employed individuals. 

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First-time jobless claims in total equated to about 1.2 million without seasonal adjustments for last week. Continued benefit claims, which specifically count applicants that submitted their forms for at least two weeks in a row or more, reached 4.2 million in the last week of February, which is slightly smaller when compared to the week prior. 

At this point last year the labor crisis was just beginning with about 6.9 million Americans applying for first-time unemployment, and millions of jobs disappearing in general. While millions of new jobs have been created within the past year and many Americans were able to get back to work, the nation is still struggling to rebuild the economy.

The American Department of Labor employment report cited “fewer jobs added in February than expected: 117,000 versus the 177,000 forecast. Even though the private sector report and the government’s official figures, which are due Friday at 8:30 am ET, aren’t correlated, it’s not a great sign.”

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Economists estimate that about 182,000 new jobs were added to the US market in February, which is up 49,000 from the previous month. When compared to February 2020, however, the nation is still down about 9.7 million jobs; at that point in time the unemployment rate for America was actually at a 50-year low of 3.5%.

“The expectations are widely different, ranging from a 100,000 jobs lost to 500,000 jobs gained. We expect the US jobs recovery to show some encouraging progress in February,” said Lydia Boussour, lead US economist at Oxford Economics.

The rollout of Covid-19 vaccines and the reopening of the Paycheck Protection Program for small businesses will hopefully help assist the nation in creating new jobs. The winter storms that have been impacting the country, however, are also influencing how many new jobs are created. The unemployment rate is currently projected to remain at 6.3% for now as well, however, the Federal Reserve Chairman Jerome Powell claimed last week that the actual unemployment rate is likely closer to 10%.