The U.S. Department of Labor (DOL) has issued a notice of proposed rulemaking related to classifying employees as independent contractors.

The change could result in more workers being classified as employees and therefore entitled to certain federal protections such as minimum wage, workers’ compensation and overtime pay.

The rules would effectively undo a Trump administration-era ruling that took effect in January 2021.

Under the 2021 rule, an “economic reality test” is used that depends largely on two core factors – control over work and the opportunity for profit or loss.

Other factors could be taken into consideration but were given less weight.

Now the DOL has proposed returning to a “totality of the circumstances” evaluation under which applicable standards do not have a predetermined weight.

Additional factors can include:

  • Permanence of the work relationship
  • The worker’s investment in equipment or materials required for the task
  • Whether the work is an integral part of the employer’s business
  • Worker skill and initiative

Analysts have said the proposed rule will have the biggest impact on businesses that rely on gig workers, such as Uber and Lyft.

However, statements from both Uber and Lyft imply that the change is merely a return to the status quo.

In advance of an expected 2023 effective date, businesses should review contract language in which they “reserve the right” to control aspects of a contractor’s work.

Under the proposed rules, such language could constitute an employee relationship, even if you don’t actually exercise that control.