House Committee Urges Department of Labor to Reconsider New Independent Contractor Rules, Citing Disproportionate Impact on Small Businesses
The House Committee on Small Business is calling on the Department of Labor (DOL) to reconsider its new rules for determining whether a worker is an independent contractor. The committee argues that these regulations will have a disproportionate impact on smaller entities. In a letter addressed to Acting Labor Secretary Julie Su, Committee Chair Roger Williams expressed concern over the changes, stating that the DOL failed to properly consider small businesses in this rule.
The new rule, titled “Employee or Independent Contractor Classification Under the Fair Labor Standard Act,” was recently finalized. It repeals a contractor test implemented during the Trump administration and returns to a six-factor “economic realities” test. This change makes it more challenging for businesses to classify workers as independent contractors.
Acting Secretary Su defended the new rules, emphasizing that misclassifying employees as independent contractors deprives workers of their basic rights and protections. She believes that the rule will help protect workers, especially those who are most vulnerable to exploitation, by ensuring proper classification and fair wages.
However, Chair Williams argues that the rule threatens the livelihoods of many entrepreneurs. He claims that the method for determining worker classification is confusing and will discourage businesses from hiring gig workers due to fears of misclassification lawsuits. Additionally, he points out that over 22 million independent contractors will be impacted by this change, potentially forcing them to reclassify as employees and no longer operate as their own small businesses.
The concerns raised by the House Committee on Small Business are echoed by several trade groups and business organizations, including the Associated Builders and Contractors and the U.S. Chamber of Commerce. These organizations argue that the DOL’s new rule fails to consider its impact on small businesses.
Chairman Williams expressed frustration with the Biden administration’s approach, stating that the rule disregards the partnership between independent contractors and small businesses. He emphasized the committee’s commitment to holding the administration accountable and ensuring that entrepreneurs have a voice in the decision-making process.
The construction, trucking, and healthcare industries are expected to be the most affected by these new regulations. The impact on small businesses could be significant, potentially hindering their ability to operate efficiently and collaborate with independent contractors.
It remains to be seen whether the Department of Labor will reconsider the new rules in light of the concerns raised by the House Committee on Small Business and various industry groups. The outcome of this debate will have far-reaching implications for small businesses and independent contractors across the country.
