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(Reuters) — The Labor Department on Wednesday rescinded a Trump-era rule that would have made it easier for businesses to classify workers as independent contractors instead of employees under the federal Fair Labor Standards Act.
“By withdrawing the independent contractor rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” Labor Secretary Marty Walsh said in a statement.
“Too often, workers lose important wage and related protections when employers misclassify them as independent contractors,” he said.
Walsh told Reuters in an interview last week that a lot of U.S. gig workers should be classified as “employees” who deserve work benefits. His comments signaled a shift in policy and hurt stocks of companies such as Uber Technologies Inc. and Lyft Inc. that employ gig labor.
Gig workers are independent contractors who perform on-demand services, including as drivers, delivering groceries or providing childcare — and are one-third more likely to be Black or Latino, according to an Edison Research poll.
Walsh said in the interview that his department would have conversations in coming months with companies that employ gig labor to make sure workers have access to consistent wages, sick time, health care and “all of the things that an average employee in America can access.”
The rule by President Donald Trump's administration, finalized in early January before he left office on Jan. 20, would have hampered workers’ ability to earn a minimum wage and overtime compensation— protections offered under the FLSA.
It was supposed to take effect in March but did not because it was being reviewed by President Biden’s Labor Department. The withdrawal will be effective on Thursday.
An Uber spokesman said last week that an overwhelming majority of app-based workers want to stay independent because it allows them to work when, where and how they want with flexibility no traditional job can match.
The FLSA includes provisions that require covered employers to pay employees at least the federal minimum wage for every hour they work and overtime compensation at not less than one-and-a-half times their regular rate of pay for every hour they work over 40 in a workweek. FLSA protections do not apply to independent contractors.
“The independent contractor rule was in tension with the FLSA’s text and purpose,” the Labor Department said.