New guidance about worker classification standards from the U.S. Department of Labor (DOL) could help workers in California avoid misclassification. Employers sometimes knowingly or unknowingly misclassify workers as independent contractors instead of W2 employees. When misclassified as an independent contractor, a person receives no minimum wage protections, insurance or other benefits normally associated with employment.
New DOL rule removes priorities
Scheduled to take effect on March 11, 2024, the employee classification rule uses six criteria that employers must use to determine employee or contractor status. The previous version of the criteria emphasized the amount of control a person had over work activities and level of entrepreneurial opportunity. The new version does not give extra weight to any criteria over others.
Workers most affected by misclassification
Labor advocates insist that some employers purposefully misclassify workers as independent contractors to reduce payroll expenses. As an example, a construction worker classified wrongly as an independent contractor instead of an employee misses out on $10,000 to $16,000 a year in compensation and benefits.
According to the Economic Policy Institute, workers in these industries experience the most employment law violations:
- Construction
- Truck drivers
- Cleaners
- Landscapers
- Call center agents
- Security guards
Few changes expected for gig workers
Many people work as independent contractors for ride-hailing and delivery companies, like Uber, Lyft and DoorDash. The new rule that includes an assessment of how integral a worker’s functions are to a company’s core business model could disrupt the current practice of making all gig workers independent contractors.
With the announcement of the new rule, both Uber and Lyft issued statements claiming that the classification system does not alter how they currently classify workers. A statement from Lyft emphasized that the new rule created confusion but would not ultimately apply to its drivers.