Millions of janitors, home-care and construction workers and gig drivers could be classified as employees under a proposal by the Labor Department.

Companies are required to give certain benefits to employees but not to contractors, such as paying a minimum wage, overtime, a portion of a worker's Social Security taxes and contributions to unemployment insurance.

The Labor Department will apply the proposed rule to determine if a worker is an employee or a contractor. The test takes into account factors such as how much control workers have over how they do their jobs and how much opportunity they have to increase their earnings by doing new things. Workers who don't have much of either are considered employees.

The Labor Department created a new test that lowered the bar for employee classification.

The proposal is intended as an interpretive rule that doesn't have the legal force of a regulation specifically authorized by Congress and it applies only to laws that the department enforces. The rule wouldn't affect what the IRS decided about the status of gig workers.

Many employers and regulators in other countries will look at the department's interpretation when making decisions about worker classification, and many judges will use it as a guide.

The proposal is a blow to gig companies and other service providers that argue that their workers are independent contractors.

The labor secretary said in a statement that they have seen employers misclassify their employees as independent contractors. Workers are deprived of their federal labor protections when they are misclassified.

Activists who support gig workers complained that the administration had been too slow to protect them.

Administration officials said in interviews that they were merely returning to a standard that federal courts have consistently upheld over the decades, as the Biden administration proposed its rule.

A federal judge restored the Trump rule after the Biden administration scrapped it. The new proposal would replace the Trump rule with a new one. Administration officials were confident that the rule would survive judicial scrutiny.

ImageUber and other gig companies say changes to how some of their workers are classified could force them to change their business models.
Uber and other gig companies say changes to how some of their workers are classified could force them to change their business models.Credit...Jim Wilson/The New York Times
Uber and other gig companies say changes to how some of their workers are classified could force them to change their business models.

The degree of control a company has over a worker and the extent to which a worker can increase his or her income should be the main factors in determining if a worker is an employee or a contractor.

It was suggested by the Trump Labor Department that gig workers would probably be classified as contractors. Proponents argued that the Trump approach was necessary so enforcement didn't snuff out new ways of doing business

The Biden Labor Department's top lawyer said in an interview that the Trump rule threatens to increase rather than decrease misclassification.

According to the proposal by the Biden Labor Department, there are a number of factors that must be taken into account when determining whether a worker is an employee or a contractor. The work being performed is central to a company's business and what kind of investments workers make to do their jobs are other factors.

Administration officials said that they were not prejudging the outcome of any one of the cases if they applied the test laid out in the proposal to individual cases. The proposal didn't target a specific industry.

The determination is made based on the specific facts that we look at. Workers in a wide range of industries are harmed by mis classification.

Gig companies have been trying to influence laws and regulations for a long time. gig companies spent $200 million to help pass a ballot measure that would exempt their workers from employee status while giving them limited benefits after the California Legislature passed a bill that classified gig drivers as employees.

The measure was found to be unconstitutional by a state judge. The decision is being challenged.

Gig companies have tried and failed to pass similar measures in other states, but did help pass a contractor measure in Washington State.

Drivers prefer the flexibility that independent contractor status gives them, such as the ability to work when and where they please, according to the companies. The data they cite seems to affirm this.

Legal scholars say there is no reason why companies can't give workers the same flexibility.

Mr. Walsh said that 95 percent of people would say yes to being classified as employees.

The department will incorporate feedback from the public into a final rule after a month and a half of formal comments.