Biden administration will announce an independent contractor rule that could upend the gig economy. According to an administration official, the administration of U.S. President Joe Biden plans to publish a final regulation as early as this week that will make it harder for businesses to designate workers as independent contractors rather than employees, who usually cost a business more.

The U.S. Department of Labor regulation, which was initially suggested in 2022 and is expected to encounter court challenges, stipulates that when workers are “economically dependent” on an organization, they must be treated as employees, entitled to additional benefits and legal protections than contractors.

The law, which goes into effect later this year, will probably influence various businesses. Still, app-based services mainly relying on contract labor have drawn the most attention because of their possible effects. Following the draft regulation proposal in October 2022, the stocks of DoorDash, Uber Technologies Inc., and Lyft Inc. all saw a 10% decline.

The vice president of the U.S. Chamber of Commerce, the most prominent business lobby in the country, Marc Freedman, claims that the rule is one of the most significant that the Labor Department agency that upholds wage standards in the United States has ever issued. However, he said that the rule’s initial form offers no advice to businesses on distinguishing between contractors and workers.

“Economic dependence is an elusive concept that in some cases may end up being defined by the eyes of the beholder,” Freedman stated.

A worker’s “opportunity for profit or loss, investment, permanency, the degree of control by the employer over the worker, (and) whether the work is an integral part of the employer’s business” are among the considerations the Labor Department stated it would take into account in the proposed regulation.

The new rule supersedes a guideline from the Trump administration that allowed employees to be classified as contractors even if they owned their businesses or could work for rival enterprises, like a driver for Uber and Lyft.

Legal experts have predicted that litigation against the new rule would likely center on the department’s dramatic departure from the Trump-era regulation. Under federal law, agencies must provide sufficient justification for their decision to remove and replace current regulations.

While worker advocates have argued that a stricter criterion was required to address the widespread misclassification of workers in particular industries, the Biden administration has claimed that the Trump-era regulation violated U.S. wage standards and was inconsistent with decades of federal court rulings.

In a report published last year, the left-leaning Economic Policy Institute estimated that truck drivers who are treated as contractors can make up to $18,000 less annually than those who are treated as employees, while home health aides can lose out on up to $9,500 in pay and benefits and construction workers can see a nearly $17,000 drop in pay.

Following the proposal of the draft regulation, business organizations immediately attacked it. Any policy change is anticipated to result in higher labor costs across various industries, including manufacturing, retail, and trucking.

The majority of state and federal labor rules, which include minimum wage and overtime compensation requirements, only apply to firm employees, who, according to research, can cost them up to 30% more than independent contractors.

More than 64 million Americans, or about 40% of all workers, completed some freelance work in the previous year, according to a poll conducted in December by the freelance marketplace Upwork.