DOL Delays Trump Administration's Independent Contractor Rule
Update: The U.S. Department of Labor (DOL) on May 6, 2021, officially withdrew the final rule clarifying independent contractor status under the Fair Labor Standards Act (FLSA). The move indicates a potential shift toward classifying more workers as employees. Read further analysis in Holland & Knight's alert, "DOL Rescinds Trump-Era Rule Regarding Employment Status Under the FLSA," May 19, 2021.
As predicted in a previous Holland & Knight Transportation Blog post (see "Another Shift on Joint Employment and Independent Contractors," Jan. 12, 2021), the Biden Administration's rollback of the business-friendly independent contractor rule announced in the waning days of the Trump Administration is underway.
On Jan. 7, 2021, the U.S. Department of Labor (DOL) published a new rule for determining whether workers are employees under the Fair Labor Standards Act (FLSA). The new rule, which was slated to become effective on March 8, 2021, focuses on the "economic realities" of the work arrangement and, in particular, whether the putative employer has actual control over the worker. However, on Jan. 20, 2021, his first day in office, President Joe Biden directed the heads of federal agencies to consider delaying the effective dates of all regulations that had not yet taken effect. Accordingly, on Feb. 5, 2021, the DOL proposed to delay the effective date of the new independent contractor rule until May 7, 2021, and it sought comments on this proposal.
The DOL received more than 1,500 comments, with labor groups and various state attorneys general supporting the delay. Numerous businesses, trade associations and independent contractors opposed the delay, on the basis that the "economic realities" standard in the independent contractor rule is the correct approach, has been used for decades and provides much-needed clarity.
On March 2, 2021, the DOL announced that it decided to delay the independent contractor rule's effective date from March 8 to May 7, 2021, as proposed, stating that the delay will allow the agency additional time to review the multiple issues of law, policy and fact before it goes into effect. Whether it ever goes into effect, rather than being withdrawn or rewritten, remains to be seen.