The U.S. Department of Labor on Jan. 9 issued a final rule, more than a year in the making, on the definition of an independent contractor.

First proposed in October 2022, the rule provides guidance to employers in determining if workers are employees or independent contractors under the Fair Labor Standards Act (FLSA). DOL said it seeks to “combat employee misclassification” that can lead to a loss of rights to minimum wage, overtime pay, and other benefits.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” said Acting Secretary of Labor Julie Su, in a statement. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

The rule, set to take effect on March 11, is not supported by some lobbying groups as well as the U.S. Chamber of Commerce.

“The Department of Labor’s new regulation redefining when someone is an employee or an independent contractor is clearly biased towards declaring most independent contractors as employees, a move that will decrease flexibility and opportunity and result in lost earning opportunities for millions of Americans,” U.S. Chamber of Commerce Vice President of Workplace Policy Marc Freedman said in a statement. “It threatens the flexibility of individuals to work when and how they want and could have significant negative impacts on our economy. Making matters worse, the rule is completely unnecessary, as the [DOL] continues to report success in cracking down on bad actors that are misclassifying workers.

Freedman said the Chamber is reviewing it options, including litigation.

Related: New Contractor Rule to Be Unveiled Soon That Could Upend Gig Economy

Companies within the gig economy, who rely on independent contractors, were said to be particularly affected, but a blog from Uber written by its Head of Federal Affairs CR Wooters said the rule will “not materially change the law under which we operate, and will not impact the classification of the over one million Americans who turn to Uber to earn money flexibly.” Lyft added its initial take on the change is that “there is no immediate or direct impact on Lyft’s business at this time.”

The rule erases one the DOL passed in 2021 that made it easier for employers to classify workers as independent contractors.

“The Trump-era rule reduced the number of primary factors the DOL would consider when determining whether a worker is an independent contractor or an employee to two “core factors”—the nature and degree of control over the work and the worker’s opportunity for profit or loss based on initiative and/or investment,” explained Allan Bloom, leader of law firm Proskauer’s Wage and Hour Practice Group. The new rule returns this determination to its “historical roots” by considering six factors, he added.

According to the DOL, the following factors can be used in an “economic reality test” to define a worker as an employee or independent contractor:

1. Opportunity for profit or loss depending on managerial skill.
2. Investments by the worker and the employer.
3. Permanence of the work relationship.
4. Nature and degree of control.
5. Whether the work performed is integral to the employer’s business.
6. Skill and initiative.

The Associated Builders and Contractors (ABC) on Jan. 9 also released a statement, saying the rule is “ambiguous and difficult to interpret.”

“Under the rule’s multifactor test, employers will now be forced to guess which factors should be given the greatest weight in making the determination,” said Ben Brubeck, vice president of regulatory, labor and state affairs at ABC. “Instead of promoting much-needed economic growth and protecting legitimate independent contractors, the final rule will result in more confusion and expensive, time-consuming, unnecessary and often frivolous litigation, as both employers and workers will not understand who qualifies as an independent contractor.”

The American Trucking Associations CEO Chris Spear said the new rule replaces “a clear and straightforward standard with a tangled mess that weakens our supply chain and undermines the livelihoods of hundreds of thousands of truckers across the country.”

“I can think of nothing more un-American than for the government to extinguish the freedom of individuals to choose work arrangements that suit their needs and fulfill their ambitions,” Spears said.

Related article: New Federal Rule Tightens Worker Classification Standards

This article was originally published by Insurance Journal. Reporter Chad Hemenway is the National Editor of Insurance Journal.