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October 13, 2022

US retail sector concerned by new contractor proposal

The US Department of Labor has issued a notice of proposed rulemaking on guidelines around how contractors are classified, much to the concern of US retailers.

By Hannah Abdulla

The rule could result in more people being deemed employees instead of “independent contractors”, that are granted federal protections like minimum wage and overtime pay which the retail industry believes could increase costs for businesses.

When employers classify their workforce as contractors they are not under obligation to pay payroll taxes that fund Social Security or unemployment insurance programmes.

Just Style understands the proposal in its current form is not expected to significantly impact textile and apparel workers.

The American Apparel and Footwear Association (AAFA) and the United States Fashion Industry Association (USFIA) were unable to contribute a comment.

However, the independent contractor proposal, The National Retail Federation’s senior vice president of government relations David French, said: “The modern workplace is more complex in the wake of the pandemic. Retailers, along with countless other employers, maintain a wide range of business relationships with independent contractors, including billing, facility maintenance, data analysis, delivery, marketing and other critical services.

“The current rules clearly define the difference between employees and independent contractors, providing much-needed legal certainty for employers, employees and independent contractors alike. The changes being proposed by the Labor Department will significantly increase costs for businesses across all industries, and further drive already rampant inflation.

“NRF staunchly opposes a change in this important area of law, which is both unwarranted and unnecessary. This decision will only foster massive confusion, endless litigation, reduced innovation and fewer opportunities for employees and independent contractors alike.”

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