Trump Administration Seeks to Eliminate Biden Worker Classification Rule

The Trump administration has proposed scrapping a 2024 rule that made it harder for companies to classify workers as independent contractors instead of employees. The move would benefit industries like trucking, retail, and app-based services that rely heavily on contractor labor.

The Trump administration announced Thursday its plan to eliminate a worker classification regulation from 2024 that business organizations have strongly criticized for creating obstacles when companies want to designate workers as independent contractors instead of full employees.

The Department of Labor issued a proposal to eliminate the regulation, stating it contained legal defects and prevented workers from enjoying the flexibility that independent contractor status provides.

Since Trump returned to office last year, the department has ceased enforcement of the regulation, which mandates companies classify workers as employees under federal wage laws when those workers are “economically dependent” on the company for their livelihood. The new proposal would substitute this with a business-preferred approach that examines the level of control companies exercise over their workers.

Eliminating this regulation will significantly benefit companies across multiple sectors, including trucking operations, healthcare providers, retail sales organizations, and app-based transportation and delivery platforms like Uber and Instacart. These companies depend extensively on contractor relationships and have faced numerous legal challenges alleging worker misclassification to reduce costs.

Research indicates that employees can increase business expenses by as much as 30%, as they receive minimum wage guarantees, overtime compensation, unemployment benefits, expense reimbursements, and additional protections that contractors do not receive.

Worker classification disputes have emerged as among the most heated employment controversies during the past ten years, with industry associations conducting intensive lobbying efforts to overturn the 2024 regulation after Congressional Republican attempts to prevent its implementation failed to advance.

The regulation had superseded a rule from Trump’s initial presidency that permitted workers who operate their own businesses or can work for rival companies, such as drivers working for both Uber and Lyft, to receive contractor classification. Thursday’s proposal would essentially restore that previous framework.

Friday will mark the formal publication of the proposal, initiating a 60-day window for public feedback.

The Biden administration’s regulation was anticipated to generate numerous new legal cases claiming worker misclassification as independent contractors. However, this wave of litigation failed to emerge, probably because the rule remained active for only a brief period before the Labor Department indicated its intention to repeal it last year.

At least five legal challenges targeted the regulation from freelance workers, employers, and business organizations, with these cases either dismissed or suspended while the department continues its rulemaking process.

Last year, a Trump-appointed federal judge in New Mexico validated the regulation, dismissing a trucking company’s arguments that the Labor Department had overstepped its authority and improperly attempted to rewrite federal legislation. The company’s appeal has been suspended and will likely face dismissal following the rule’s repeal.