On Jan. 9, the U.S. Department of Labor announced a final rule on classifying workers as employees or independent contractors. Although the new six-factor guide is meant to help clarify and, in many cases, tighten standards around misclassification of workers, third-party delivery companies are confident that it is business as usual for delivery workers.
As the legal landscape around third-party delivery workers begins to shift substantially through local legislation — including a new New York City minimum wage law for contractors that work for delivery apps — on a federal level, standards might not change much for these same delivery app workers.
The final rule, which goes into effect on March 11, 2024, reinterprets the 1938 Fair Labor Standards Act and negates the effects of the Independent Contractor Status Under the Fair Labor Standards Act, which was passed during the Trump administration.
The new rule includes a six-factor test that determines whether a worker is a contractor or employee with criteria that weigh economic factors, including the degree to which the employer determines how work is done (i.e., level of independence of the worker), the worker’s opportunity for profit and loss, the amount of skill the job requires, the permanence of the working relationship, the worker’s investment in tools for the task (like a delivery driver’s car or bike, for example), and the extent to which the rendered services are integral to the company’s operations.
The 2021 rule under the previous presidential administration was much simpler and weighed mainly two factors: the employee’s control over their work and their opportunity for profit or loss. Even though this rule is more complex, third-party delivery companies are convinced that it will change nothing about the employment status of their delivery workers, who are currently classified and paid as independent contractors.
“We are confident that Dashers are properly classified as independent contractors under the FLSA, and we do not anticipate this rule causing changes to our business,” DoorDash said in a statement. “We will continue to engage with the Department of Labor, Congress, and other stakeholders to find solutions that ensure Dashers maintain their flexibility while gaining access to new benefits and protections.”
Uber Eats released a similar statement, adding that their drivers have made it overwhelmingly clear that “they do not want to lose the unique independence they enjoy.”
There are other state-specific labor rules that more vigorously apply standards to determine whether an employee is full-time or not, like the ABC test that states like New Jersey and California have implemented, which asks if an employee works outside of an employer’s control, if they maintain their own pace of business, and if the work is outside the usual course of business. Under this jurisdiction, the delivery app-delivery worker relationship might be questioned as an independent contractor dynamic.
Despite the confidence of delivery companies, policy experts are skeptical of this newly implemented rule, and claim that the vagueness of the criteria will create questions and likely, more misclassification cases brought against companies both inside and outside the food delivery service market.
"The Labor Department's new worker classification rule is a significant step back for freelance workers, companies, and consumers, needlessly adding confusion to the employee vs. independent contractor debate,” Competitive Enterprise Institute labor policy expert Sean Higgins said in a statement. "This change is problematic for workers seeking flexible hours, as employers may hesitate to hire contractors, fearing regulatory crackdown. Workers who thrived in the gig economy will find a useful means of earning money no longer available to them. This shift could also adversely affect consumers who value the convenience of the gig economy.”
According to the Associated Press, the U.S. Chamber of Commerce is already considering challenging the rule in court.
Contact Joanna at [email protected]