Labour Department reverses two Trump-era rules

The Labour Department announced two moves Thursday to reverse rules issued under the Trump administration that narrowed the protection of federal law for millions of workers.

One of the rules was likely to have deemed millions of workers in industries like construction and transportation — many of them gig workers — to be contractors rather than employees.

The department had finalized the rule in January, two weeks before President Joe Biden’s inauguration. But the Biden administration has delayed the rule’s effective date until May, a step toward rescinding it. The rule would probably have made workers like Uber drivers ineligible for the federal minimum wage and overtime pay, which apply only to employees.

Industry officials have estimated that treating gig workers as employees can raise labour costs by 20% to 30%, and Uber and other gig companies have fought on multiple fronts over the years to classify workers as contractors.

In November, voters in California approved a ballot initiative freeing gig companies from a state law that had effectively required them to treat workers as employees, a campaign in which Uber, Lyft and DoorDash invested tens of millions of dollars. Biden opposed the effort to scale back the law, although some prominent supporters and advisers to him and Vice President Kamala Harris have ties to the gig companies.

In its proposal to rescind the Trump rule, the Labour Department said the rule had improperly narrowed the list of factors that courts have traditionally relied on to determine employee status.

The department said it was also moving to undo a second rule enacted by the Trump administration, this one governing when a company should be considered a so-called joint employer alongside franchisees or contractors that directly employ a worker.

Franchisees and contractors often have limited resources to pay legal penalties related to violations of minimum-wage and overtime laws, so a more expansive joint employer rule makes it more likely that employees can be made whole if a violation has occurred.

The Trump rule had narrowed the circumstances under which a company could be considered a joint employer. In September, a federal judge struck down most of the Trump rule, arguing that the administration had arbitrarily departed from the statute governing federal minimum-wage and overtime rules.

The public will have until April 12 to comment on the moves announced Thursday, after which the Labor Department can finalize them.