The move has riled some companies who rely heavily on gig workers - such as Uber, Lyft and DoorDash - whose costs could increase by as much as 30% and, therefore, legal challenges are expected.
The new rule from the Labor Department overturns one put in place under former President Donald Trump's administration, which made it easier to classify workers as independent contractors.
Workers will now be considered employees, rather than contractors, when they are "economically dependent" on a company.
Business groups and Republican lawmakers say that will cause millions of workers to lose job opportunities and create confusion that could lead to costly litigation.
But worker advocates and some Democratic leaders say the rule is necessary to ensure basic worker protections.
The new rule is set to take effect March 11.
