Litigation over worker misclassification has increased, coinciding with the rise of the gig economy — especially in the wake of the coronavirus pandemic — and amplifying the need for clarification.

As The Wall Street Journal notes, the clarification makes it more difficult for such workers as Uber, Lyft, and DoorDash drivers to be considered employees who are "covered by federal minimum-wage and overtime laws," adding that "they could be responsible for paying the employer portion of Social Security taxes."

The final rule goes into effect March 8 and includes the following clarifications:

• It reaffirms an "economic reality" test to determine whether an individual is in business for himself or herself (an independent contractor) or is economically dependent on a potential employer for work (an FLSA employee).
• It identifies and explains two "core factors" to make that distinction: 1. The nature and degree of control over the work 2. The worker's opportunity for profit or loss based on initiative and/or investment
• It identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. These factors are: 1. The amount of skill required for the work 2. The degree of permanence of the working relationship between the worker and the potential employer 3. Whether the work is part of an integrated unit of production
• The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
• It provides six fact-specific examples applying the factors.

While the rule is not a federal mandate, one Department of Labor official told the Journal that it is intended to be a model for states.

The need for clarification stemmed from a California law passed in September 2019 that made it more difficult for companies to label workers as independent contractors — thus giving those individuals access to the state's minimum wage and overtime laws, workers' compensation coverage, and paid sick days. Two months later, Uber, Lyft, and DoorDash won their fight to be exempted from reclassifying gig workers as employees.

Deputy Secretary of Labor Patrick Pizzella told the Journal that California's law had skewed the definition of an independent contractor, adding that the Department of Labor's rule "respects the time-honored American tradition of being your own boss."

Catherine Ruckelshaus, general counsel at the National Employment Law Project, doesn't see it that way. "This rule gives license to employers to call most of their workers independent contractors," she told the newspaper. "That would dramatically narrow worker protections … in the jobs that particularly need them, including construction, agriculture, janitorial, and delivery jobs."

Read more: 

• Uber and Lyft strike: What's at stake for injured gig workers?
• Gig work, data privacy and other workplace trends to watch
• NLRB adopts business-friendly independent contractor test