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DOL announcement signals potential shift in gig economy

Apr 30, 2021 | Employment litigation

The growth of the gig economy has changed the way numerous California companies approach their employment needs. Things continue to change with shifts in political landscapes and court rulings.

For instance, U.S. Labor Secretary Marty Walsh recently announced his support for consistency in employee classification. The announcement could mark a shift away from categorizing gig workers as contractors and toward categorization as employees.

What does this mean?

Worker classification is a complicated issue because there are different pros and cons, depending on who you are. 

Independent contractors have more flexibility in their roles, but they do not receive benefits like health coverage or paid time off from the hiring entity. Employees receive these benefits from an employer, but they have less flexibility and control over their work details.

Thus, the Department of Labor vocalizing support for classifying gig workers as employees puts businesses in a tricky spot if they currently categorize them as contractors. 

Should this support drive policies that more consistently back gig workers as employees, business owners may need to rethink operations. Specifically, they may need to shift resources to cover expenses like health insurance, overtime pay and other financial duties. 

Assessing categorization in your company

Businesses with employees, contractors or both should be careful when classifying workers. Misclassifying workers can result in unnecessary spending and possibly lawsuits.

That said, classification can be far more complex of an issue than it may initially seem. It is not always obvious whether someone is working as an employee or independent contractor. 

California laws provide some guidance, though. Parties can refer to the Borello test. This test weighs several factors to distinguish between an independent contractor and an employee. However, even that test leaves room for questions and challenges. 

Worker classification is already a complicated topic. Adding in potential shifts in federal laws and regulations makes it even more thorny. Accordingly, workers and hiring entities alike would be wise to seek legal guidance if classification questions arise.