The Biden administration announced a new proposal last week that would rescind a Trump-era rule governing who is and is not a freelancer. The U.S. Department of Labor contends the return to a complex economic reality test for distinguishing employees from independent contractors will benefit worker rights.

A survey by Upwork found that 59 million Americans — more than a third of the U.S. workforce — had taken on freelance work in 2021. The Biden administration notes that such individuals pursuing their own “gigs” are important for our economy, but it is wary of organizations that treat dependent workers as freelancers to avoid minimum wage and overtime protections afforded to employees under the Fair Labor Standards Act.

“Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages,” said Secretary of Labor Marty Walsh, citing cases mistreated vulnerable workers. “The Department of Labor remains committed to addressing the issue of misclassification.”

The Biden administration hopes to roll back the current standard for determining who is a freelancer. That regulation — finalized in the final days of the Trump administration — focused deliberations on an employer’s control over a job and the opportunity for a worker to profit. Other factors were considered “highly unlikely” to outweigh those considerations.

In contrast, the Labor Department’s new proposal would return to a “totality-of-the-circumstances analysis.” It claims that this — its second attempt to throw out the Trump rule — is more consistent with case law for determining job status. It would consider a number of factors — none with predetermined weight in the analysis — including a worker’s opportunity for profit or loss, investment, degree of permanence, subjection to employer control, connection to an overall business, and skill and initiative. The agency also leaves the door open to uncategorized “additional factors” that it may consider relevant in individual cases.

In a call with reporters touting this standard as “well recognized and understood,” Labor’s Wage & Hour Division chief Jessica Looman said, “What we anticipate is that this will really help provide guidance to both avoid and prevent misclassification.”

However, many employers are wary of the Biden approach. The National Retail Federation, for example, highlighted many jobs like billing, data analysis, facility maintenance, and more that are contracted out by businesses and other organizations. Lauding the “legal certainty” of the current rule, NRF called the Biden proposal “unwarranted and unnecessary.”

“This decision will only foster massive confusion, endless litigation, reduced innovation and fewer opportunities for employees and independent contractors alike,” it said.

Similarly, Reps. Virginia Foxx (R-N.C.) and Fred Keller (R-Pa.), top Republicans on the House Education and Labor Committee, said the Department of Labor proposal “needlessly attempts to redefine many independent contractors as employees, which many workers do not want, and limits employers’ flexibility to respond to changing economic circumstances.”

“These damaging regulations are not what workers need,” they concluded.

The Biden administration’s proposed rulemaking is currently open to public comment through November 28. ECFA will continue to monitor this matter as the administration moves toward a final rule.