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Congress·In Committee·S. 4010

Sen. Lee Introduces 21st Century Worker Act to Redefine Independent Contractor Status

21st Century Worker Act

15 days ago·View on Congress.gov

Legislative Progress

Senate
House
President
Law

Key Points

  • This bill creates a single, unified federal framework to classify workers as either employees or independent contractors. The same definitions would apply across federal tax law, the Fair Labor Standards Act (minimum wage/overtime), and the National Labor Relations Act (union rights), replacing the current patchwork of different tests used by different agencies.

    From policy text

    “To clarify the classification of service provider payees as employees or independent contractors in Federal law.”
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  • Workers in a "substantial economic relationship" — meaning they work at least 30 hours a week for 4+ consecutive weeks for one company, with over 75% of pay based on time worked and the company setting their hours — must be classified as employees. This entitles them to minimum wage, overtime, and employer-paid payroll taxes.
  • Licensed professionals, business entities, short-term workers (under 30 days per quarter), direct sellers, bona fide sole proprietors, and formal bona fide contractors must be classified as independent contractors. Workers who don't clearly fit either category get to choose their own status in writing.

    From policy text

    “A service provider payee that does not meet either of the requirements of section 103 or section 104 is an elective classification service provider payee. Each elective classification service provider payee shall elect whether to be classified as an employee or an independent contractor in accordance with this section.”
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  • Companies that willfully or recklessly misclassify workers as independent contractors face a penalty of 15% of all compensation paid to that worker. Workers who fail to make their elective classification within 14 days face a fine of up to $100.

    From policy text

    “The Secretary shall impose a penalty on a service recipient payor or service provider payee responsible for a classification determination under this section who willfully or recklessly misclassifies a service provider payee as an independent contractor in an amount equal to 15 percent of the compensation paid to the independent contractor.”
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  • The bill requires a GAO study within 2 years to identify how this new classification framework would affect 25 other federal laws, including the ADA, FMLA, OSHA, ERISA, and anti-discrimination statutes. This signals the potential for much broader changes to worker protections down the road.
Labor EmploymentTaxesEconomy Finance

Impact Analysis

Personal Impact

Scores: 1 = low, 5 = highSentiment: -5 to +5 (net benefit)

Milestones

2 milestones2 actions
Mar 5, 2026Senate

Read twice and referred to the Committee on Finance.

Mar 5, 2026

Introduced in Senate

What Happens Next

Projected impacts based on AI analysis

Next tax year after enactment

New classification rules take effect for tax purposes

Workers and companies must determine classification under the new framework starting the next tax year after enactment. This affects how payroll taxes are calculated and who pays them.

Within 2 years of enactment

GAO submits report on how 25 other federal laws would need to change

Congress would receive a detailed roadmap showing how extending the new worker classification rules to laws covering workplace safety, anti-discrimination, retirement benefits, and more would affect workers and employers.

First January 31 after enactment

Annual classification reviews become required

Every January 31, companies and workers in ongoing relationships must review and confirm their classification status. A 25% change in hours or pay triggers a mandatory reclassification review.

Source Information

Document Type

Congressional Bill

Official Title

21st Century Worker Act

Bill NumberS 4010
Congress119th Congress
ChamberSenate
Latest ActionRead twice and referred to the Committee on Finance.

Sponsor

Cosponsors

(1)
R: 1

Analysis generated by AI. Always verify with official sources.