Proposed independent contractor rule draws 1,800 comments

Even after slashing its typical 60-day comment period by half, the U.S. Department of Labor received more than 1,800 comments on a proposed independent contractor rule.

The unusually high number of people who weighed in on the proposal speaks to how controversial the independent contractor issue remains across the nation, an employment attorney said. But she suggested the comments themselves also point to a clear phenomenon: Management-side stakeholders want to move away from California's stance in particular.

"What the gig economy has been trying to do in California is mirrored by what Uber and Littler Mendelson is trying to do in their comments [on] this rule," said Shannon Liss-Riordan of Lichten & Liss-Riordan PC, who is known for the class actions she's filed against Uber.

Speaking in an interview Wednesday, she referred to a suggestion management-side firm Littler Mendelson PC made to the Department of Labor in the comment letter it submitted last weekend. The federal agency's proposed rule, which was released in mid-September, aimed to simplify the test for determining whether a worker is an independent contractor, or an employee entitled to the protections offered under the Fair Labor Standards Act.

The law firm applauded the Department of Labor's efforts, but also made suggestions to the agency to further develop its rule -- including adding a provision to create "a safe harbor for businesses who adopt independent contractor practices allowed or required by federal, state or local laws."

Noting "the lack of employment protections and benefits has been the driving force behind the efforts of some policymakers to eliminate or drastically reduce independent contracting," the comments by Littler Mendelson asked the federal agency to clarify that workers who receive some employment protections to their independent contractors -- like health or retirement benefits -- will not necessarily be classified as employees.

In its own comment letter, Uber referred to a plan the company revealed this summer, which proposes new laws that "require companies like Uber to establish a system of portable benefits accounts and allow workers to withdraw funds for the benefits they want, whether it's paid time off or health insurance." The plan bears similarities to what would be achieved through Proposition 22, the Uber, Lyft, and DoorDash-backed California ballot initiative that would allow ride-share companies to be exempted from Assembly Bill 5, so they can continue classifying their workers as independent contractors while also providing them with some benefits.

Derek K. Ishikawa, who represents employers as an associate at Hirschfeld Kraemer LLP, said the safe harbor proposed by Littler Mendelson makes sense. "Outside of California and states that are not regulating the independent contractor marketplace the way California has, I think that this will provide some certainty," he said, referring to companies that have business models similar to those of Uber and Lyft.

But Liss-Riordan said, "I'm very opposed to the concept of a 'third category' [between independent contractor and employee], because really it's just trying to water down the protections that employees already have."

"That shows up in this proposal that companies be given a safe harbor so they can provide some protections without risk of being held as an employer," she said.

She also noted Littler Mendelson's letter said the Department of Labor's proposed rule should be a model for other federal agencies and states. The letter pointed to the fact that the Equal Employment Opportunity Commission, Internal Revenue Service, and National Labor Relations Board all have different standards for determining employee status, and that "it would benefit all parties if a single uniform standard governed the analysis under federal law."

Echoing a sentiment expressed by a public comment letter the National Employment Lawyers Association submitted to the federal agency on Monday, Liss-Riordan agreed the patchwork of varying rules was confusing. But, she said, the Department of Labor's proposed rule is not the right way to go.

The attorney agreed with the National Employment Lawyers Association's assertion in their comment letter that the Department of Labor "should adopt the ABC test," which it acknowledged in its proposed rule as more simpler and structured than its proposed standard but which it rejected for having a disruptive impact on certain industries.