What if a new government rule, decided not by an elected Congress but by a federal agency, suddenly put your livelihood at risk?

That, say some critics, is the situation that independent contractors in the promo products industry could find themselves in if a newly proposed rule from the U.S. Labor Department is enacted.

The proposed rule change would revise the Labor Department’s guidance on how to determine who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). That has potentially serious implications for independent contractors and businesses that rely on them in the promotional products industry.

Chuck Machion, ASI’s senior counsel and a senior vice president, and ASI Media Digital News Director Christopher Ruvo, delve into the issues in this podcast. “I think this rule can cause a lot of damage to our industry and really change the model,” says Machion.

As the podcast discusses, the practical effect of the rule would be that many people currently classified as independent contractors would likely have to be considered employees under FLSA. To be fair, some in the federal government and other circles, including certain independent sales reps in promo, believe this would be a good thing.

“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” U.S. Secretary of Labor Marty Walsh has said. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.”

Nonetheless, there’s considerable worry in promo – among businesses and independent contractors themselves – that the rule would upend how distributors partner with independent reps and how suppliers work with independent multi-line reps. A core concern is that businesses wouldn’t take on the reps as employees because they couldn’t handle the heavier costs associated with that, resulting in a lose-lose scenario in which the sales pros lose their livelihood and the businesses lose the talented selling pro.

“The rule envisions two options: employee or independent contractor. But there’s a third that helps no one: none of the above,” Machion has said. “Because of this rule, you could have companies in our industry and others saying, ‘Sorry, I have to let you go because I can’t afford to take you on as an employee.’ The company loses the salesperson, and the salesperson loses their income.”