Is Biden Coming for Your Side Hustle? What You Need to Know

The gig economy, often hailed as a lifeline for those seeking additional income or flexible work arrangements, is facing a significant shakeup. In a move sparking controversy and concerns among freelancers and independent contractors, the Labor Department has issued a final rule that may reshape the landscape of side hustles.

This development, expected to impact various industries reliant on contract labor, brings questions about the future of gig work to the forefront. As the rule aims to classify workers and distinguish between employees and independent contractors, individuals engaged in side hustles might find themselves at the intersection of potential change.

Why you might need a new side hustle

The rule, designed to redefine the classification of workers as employees rather than independent contractors, is anticipated to elevate labor costs for industries relying heavily on gig workers. A regular employee costs a business around 30% more than a contractor, which means the new rule can significantly increase labor costs.

As businesses grapple with the fallout, the viability and sustainability of specific side hustles come into question. For app-based workers, like Uber, Lyft, and DoorDash, and others who make extra cash on the side, the new ruling will cause significant changes.

Although these popular companies have not released any changes to their structures just yet, it could potentially alter the number of employees companies like Uber and DoorDash allow through their systems. They might be forced to take on fewer “partners” through their apps, thus possibly eliminating thousands of side hustles for Americans throughout the gig economy.

How the new law will change the current side hustle landscape

By requiring workers to be deemed employees when "economically dependent" on a company, the rule seeks to align with a traditional employer-employee relationship. This means workers who earn extra income online or work through companies with the designation of “contractor” might be at risk.

This means you might be taxed differently and ultimately, might make less money. The potential impact on labor costs, worker classification, and the gig economy's overall structure comes under scrutiny, which could massively decrease the size of a side-hustle economy that has provided flexible work arrangements for millions of Americans.

While it might cost many workers, the new law also aims to protect them. Acting U.S. Labor Secretary Julie Su said the misclassification of workers as contractors rather than employees particularly harms low-income workers who would benefit the most from legal protections such as minimum wage and unemployment insurance, reports Reuters.

The overall argument also states that law-abiding businesses are forced to compete with dishonest employers who advantageously classify their workers as contractors to save money.

Employers are not forced to provide benefits like health insurance and minimum wage to employees if they are classified as contractors. An estimated 3.4 million workers are expected to be affected by the ruling.

Types of side hustles likely impacted

Examining the industries and types of side hustles that are poised to feel the brunt of this regulatory shift, the effects are widespread. From trucking and manufacturing to healthcare and app-based gig services, a range of side hustles faces potential disruption. Here are some of the most important jobs and industries to pay close attention to:

• Construction
• Healthcare
• Delivery services
• Rideshare services
• Dog walkers
• Personal chefs
• Nannies
• Task services

Construction and healthcare are two areas where misclassification of workers is common, that the ruling will likely affect heavily. App-based delivery services like DoorDash and UberEats, whose entire business models focus on “gig” workers, have garnered the most attention and will be among the most hard-hit sectors.

How to financially prepare

As uncertainty looms, understanding how to prepare yourself financially for potential changes is crucial. Some workers might benefit from the changes and begin receiving benefits as a result of the new rule. Others might find it’s better to seek other employment options.

The rule is set to take effect on March 11th, which means if you are thinking of looking for a new position, now is the time. Workers have ample time to make a move or see if it’s better to stay in their current position and begin receiving benefits. You can also adapt to find new ways to receive a secondary income if you have a full-time job.

Bottom line

While the rule introduces uncertainties and concerns, it also prompts a reevaluation of the existing structures. Many workers will now have benefits they did not have before. Others will need to find new ways to side hustle. As the gig economy evolves in response to regulatory shifts, individuals navigating side hustles are urged to stay informed and proactive in safeguarding their financial pursuits.