US Senate Proposes Clearer Worker Classification Under New Bill
A new bill in the US Senate aims to simplify how workers are classified under federal law. The 21st Century Worker Act, introduced by Sen. Mike Lee (R-UT), seeks to replace conflicting standards with a single, clear test. Experts argue the current system creates confusion for both employers and employees over freelancer or traditional worker status.
Worker classification in the US has long been a shifting landscape. In the 1980s and 1990s, the IRS used a 20-factor test focusing on control over behaviour, finances, and work relationships. Under the Trump administration, the Department of Labor introduced a 2021 rule favouring flexibility for independent contractors. However, the Biden administration rescinded this in 2024, replacing it with a six-factor economic reality test that emphasises worker dependence. A new independent contractor rule took effect on 11 March 2024, reinforcing a multifactor approach, while some courts, like the 11th Circuit, have struck down stricter ABC tests in certain states.
The 21st Century Worker Act proposes a straightforward, bright-line test to settle ongoing disputes. It would allow workers and businesses to mutually agree on classification in cases where traditional definitions don't fit neatly. The bill also requires the Government Accountability Office to study the impact of these changes.
Sean Higgins, a research fellow at the Competitive Enterprise Institute, supports the legislation. He highlighted that the Labor Department has revised worker classification rules four times in recent administrations. According to Higgins, this inconsistency creates uncertainty for both workers and employers, making a legislative solution necessary.
If passed, the bill would provide a uniform standard for independent contractor status across federal labour and tax laws. It aims to reduce confusion while protecting worker rights. The proposed changes would also give businesses and employees more clarity when negotiating work arrangements.
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