The Tide is Turning: How Upcoming Regulatory Shifts Will Boost the Gig Economy and the 1099 Workforce

In the last couple of years, gig companies have grappled with a shifting regulatory landscape that has posed significant challenges to the 1099 model. From the U.S. Department of Labor’s (“USDOL”) March independent contractor rule under the Fair Labor Standards Act (“FLSA”) to the National Labor Relations Board’s (“NLRB”) Atlanta Opera decision under the National Labor Relations Act (“NLRA”), pro-employee classification policies have created turbulence. However, a major shift is on the horizon. With the upcoming change in administration this January, we can expect a positive turn in favor of the gig economy.

‍

First, let’s address the USDOL’s independent contractor rule which went into effect in March. When this came out it was met with a flurry of legal challenges from employer groups in federal court claiming the USDOL’s rulemaking was arbitrary and capricious. Now it’s all a moot point. Once the incoming administration takes office in January, they will quickly drop the previous USDOL’s defenses to the employer groups and roll back the rule through rulemaking to the  Trump independent contractor rule. A rule that makes it much easier to classify workers as independent contractors. A huge win for gig companies.

‍

So, what does it mean? For one, you can expect fewer agencies pushing through challenges and court decisions, as we've seen in the last few years. But even more so, those previously risk-averse legal and HR departments will recalibrate and have an opportunity to push forward huge value to their companies by utilizing 1099 workers. This is especially true in manufacturing where you can expect the Trump administration to incentivize onshoring which in turn will bring a huge increase in labor demands and product to get out the door.

‍

On the union front, we've seen a significant rise in unionization efforts, with election petitions more than doubling over the past year. The NLRB has made several employer-unfriendly decisions, resulting in faster union elections and encouraging employees to organize. This has created a climate of caution for employers, with workers emboldened to “challenge their bosses.” However, with the incoming administration, we anticipate a shift: the appointment of a new NLRB General Counsel and a corporate-friendly board majority will likely reverse these decisions. This will lead to fewer unionization efforts, fewer strikes, and an increase in “right to work” laws.

‍

Lastly, something to watch closely is what will happen with payroll taxes moving forward. Of course, 1099 workers pay their own taxes and there is no employer withholding. However, if we see federal income or payroll tax altogether slashed, it will certainly change things. So, something to keep an eye on come January on.

‍

In sum, the regulatory landscape for 1099 workers has been turbulent, but a favorable shift is approaching. With anticipated regulatory rollbacks, businesses in the gig space are well-positioned to thrive. The opportunities ahead are promising, particularly for companies ready to harness the full potential of the 1099 model. It’s an exciting time—the gig economy is set to reach new heights.

‍

Getting started with independent contractors

Business needs change rapidly in today’s volatile environment, and the flexibility offered by independent contractors can drastically increase efficiency and reduce costs by giving you access to skilled and vetted workers only when you need them.

‍

We’ve seen the use of on-demand labor reduce lead times from six weeks to three days for one client, which improved gross profit by 77%. If you want to engage with independent workers so that you can reach peak efficiency in your manufacturing, supply chain, or logistics operations, take the next step by exploring what on-demand labor is or by creating your free profile.

‍

Have any questions? Contact us