The U.S. Department of Labor’s recent regulatory change making it more difficult to classify workers as independent contractors is set to have a considerable impact on businesses. The change, set to take effect on March 11, could compel more employers to bear the cost of employee benefits such as health care and paid leave, according to a report by Bloomberg Law.
The newly implemented rule, RIN 1235-AA43, officially concerns the classification of workers under the Fair Labor Standards Act (FLSA), a legislation governing factors such as minimum wages and overtime. However, the impact of this rule is expected to extend beyond the remit of the FLSA with a significant spill-over effect. Businesses are likely to respond by treating a greater number of workers as nonexempt employees, not only for wage and overtime considerations but also in relation to benefits, tax withholding, and anti-discrimination laws.
This decision is not without potential repercussions. The transition from treating workers as independent contractors to recognizing them as employees can incur substantial costs for businesses, given the associated health care costs, paid leaves, and other benefits. While the move aligns with ongoing global trends towards greater protections for gig economy workers, it also presents significant financial and logistical issues that businesses will need to navigate in the coming months.