Department of Labor Repeals Independent Contractor Rule Effective May 6, 2021

On Wednesday, May 5, 2021, the U.S. Department of Labor announced that it was withdrawing the Trump-Era “Independent Contractor Rule.” This rule, which never went into effect following the end of President Trump’s term, was for determining whether a worker is classified as an employee and entitled to the Fair Labor Stands Act’s (FLSA) minimum wage and overtime compensation protection, or as an independent contractor who is not covered.    

The revised rule, which was to go into effect March 8, 2021, would have made it easier for businesses to legally consider workers as independent contractors by narrowing the existing “economic reality” test for establishing independent contractor status to two main factors: (1) the nature and degree of the worker’s control over the work, and (2) the worker’s opportunity for profit or loss. Some employers had praised the Trump model for providing clarity in a frequently litigated issue.   

The DOL under President Biden canceled the rule. The new Administration will revert to rely on a longstanding multi-factored “economic realities” test established by judicial precedent in deciding questions of employee status.  

The DOL reported withdrawing the rule for the following reasons:

  1. The Independent contractor rule was in tension with the FLSA’s text and purpose, as well as relevant judicial precedent.
  2. The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions, requiring a review of the totality of the circumstances related to the employment relationship. 
  3. The rule would have narrowed the facts and considerations that comprise the analysis of whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.  

Pittsburgh Labor and Employment Attorney

Frank Botta is a Partner and Chair of both the Transportation and Litigation Practice Groups. He represents commercial enterprises governed by various federal and state regulatory agencies, including the U.S. Department of Labor and the U.S. Department of Transportation. Attorney Botta has previously submitted comments to the Wage and Hour Division of the U.S. Department of Labor in support of clarifying the test now withdrawn.

For assistance pertaining to the “Independent Contractor Rule” and what it means for your business, contact at fbotta@lynchlaw-group.com or by phone at 724-776-8000.

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