There are 70 million Americans working in the gig economy, driving for Uber, delivering for DoorDash, cleaning for TaskRabbit, and the vast majority are classified as independent contractors rather than employees. That classification is costing each of them between $6,517 and $26,253 a year in wages and benefits they would receive as employees, according to the Economic Policy Institute's 2025 analysis. On February 26, 2026, the Trump Labor Department formally proposed rolling back the federal standard that made it harder for platforms to sustain that arrangement.
The rule has not been finalized as of publication. The enforcement of the stronger standard stopped more than a year ago.
What the Contractor Label Actually Costs
An employee and an independent contractor can do identical work on the same platform for the same company every day. The legal label is the only difference between them, and that label determines everything that follows. Employees are covered by federal minimum wage and overtime rules, unemployment insurance, workers' compensation, employer contributions to Social Security and Medicare, and anti-discrimination protections under federal law. Contractors receive none of those guarantees.
EPI estimates that companies save between 20 and 40 percent on labor costs by classifying workers as contractors rather than employees. That savings does not vanish. It transfers directly from the worker's balance sheet to the company's. A construction worker misclassified as an independent contractor loses as much as $19,526 per year in income and benefits compared to an employee doing the same work, per EPI's research.
Massachusetts State Auditor Diana DiZoglio quantified the scale in a 2024 report. In 2023 alone, Uber and Lyft avoided paying approximately $47 million in unemployment insurance, workers' compensation, and paid family and medical leave contributions in Massachusetts. Over the prior decade, the two companies' estimated avoided contributions totaled $266 million in that single state. The auditor's report did not include secondary costs to Medicaid, food assistance, and other public programs that workers with no safety net fall back on.
When a misclassified driver gets injured and cannot work, there is no workers' compensation check. When gig volume drops and a worker's income falls, there is no unemployment claim to file. Those costs do not disappear. They shift onto the worker and, eventually, onto the public programs designed as a last resort.
Biden Tightened the Rules. Trump Is Reversing Them.
The Biden Labor Department's 2024 rule applied a six-factor "economic reality" test to determine whether a worker was genuinely self-employed or functionally an employee of the platform. The test examined how much control the company exercised over the work, the permanency of the relationship, the worker's investment in tools and equipment, the degree of specialized skill required, and the worker's real opportunity for profit or loss. It gave investigators a precise instrument for identifying systematic misclassification.
In May 2025, the Trump DOL issued Field Assistance Bulletin 2025-1, formally directing investigators to stop enforcing the Biden standard and revert to a simpler test. On February 26, 2026, the department published a proposed rule to rescind the Biden regulation entirely and codify a two-factor framework focused on employer control and worker opportunity for profit or loss. The comment period closed April 28, 2026, with labor advocacy groups, worker centers, and several state attorneys general filing in opposition, and platform industry trade associations filing in support.
The two-factor test sets a significantly lower bar for companies to clear. Under the Biden rule, platforms had to demonstrate that workers genuinely operated independent businesses with real financial risk and genuine entrepreneurial independence. Under the proposed Trump rule, companies need to show primarily that workers have some theoretical opportunity to profit from their own pricing decisions, a threshold that platforms are structured to satisfy by design.
"A typical construction worker classified as an independent contractor would lose out on as much as $19,526 per year in income and job benefits compared with what they would have earned as an employee." (Economic Policy Institute, 2025)
A Policy Choice, Not a Market Outcome
The current classification system did not emerge from neutral market forces. Platform companies have spent tens of millions of dollars in state lobbying campaigns specifically to prevent reclassification of their workforces. In California, Uber, Lyft, DoorDash, and Instacart spent more than $205 million on California Proposition 22 in 2020 to exempt themselves from the state's worker classification law. They won. Workers in those industries in California are still classified as contractors.
Several states have begun moving in the other direction. Delaware, Colorado, and Minnesota enacted worker misclassification laws in 2025. Multiple peer nations, including the United Kingdom and Australia, have created legal frameworks that guarantee gig workers minimum pay and basic protections without eliminating flexible work arrangements.
None of those approaches eliminate flexible or on-demand work. They require that the companies benefiting from that work contribute to the social insurance systems those workers depend on. The Trump DOL's 2026 proposed rule moves federal policy in the opposite direction, extending a system that has cost workers billions of dollars and cost public programs billions more.
Sources
- Economic Policy Institute: Misclassifying Workers as Independent Contractors Is Costly for Workers and States (2025 Update)
- Economic Policy Institute: The Economic Costs of Worker Misclassification
- Economic Policy Institute: Flexible Work Without Exploitation: State Misclassification Agenda
- U.S. Department of Labor: DOL Proposes Rule Clarifying Employee and Independent Contractor Status (Feb. 26, 2026)
- HR Dive: DOL Moves to Loosen Independent Contractor Regulations (2026)
- HR Brew: Trump Administration Is Loosening Gig Worker Rules (March 2026)
- Massachusetts State Auditor: Assessing Transportation Network Companies' Financial Obligations to Massachusetts Programs
- Jackson Lewis: DOL's Proposed 2026 Independent Contractor Rule
- NPR: California Voters Give Uber and Lyft a Win (November 2020)
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