DOL Withdraws Trump-Era FLSA Independent Contractor Rule
The Department of Labor (“DOL”) has withdrawn a Trump-era proposed final rule that would have arguably broadened the Fair Labor Standards Act (“FLSA”) test for independent contractor status (the “Rule”). The Rule was scheduled to go into effect on March 8, 2021, but the Biden administration delayed the effective date and has now withdrawn the Rule entirely.
The withdrawal of the Rule means that the proposed prioritization of two core factors under the existing economic realities test (i.e., an employer’s degree of control over the work performed and the worker’s opportunity for profit or loss from the arrangement) will no longer be the DOL’s stated position on this issue. The economic realities test will return to the traditional balancing approach, and businesses must consider the entirety of the facts regarding the work relationship.
Moreover, the withdrawal of the Trump-era Rule does not appear to be the final change regarding the independent contractor test. The Biden administration has indicated that it will take a position on employee/independent contractor status similar to that of the Obama administration, emphasizing economic dependency issues. Businesses should carefully review any independent contractor relationship in light of the reversal of guidance from the DOL.
Independent contractor status has become a complex issue over the last few years, and state-specific legislation varies across jurisdictions. If you have questions about this or any other workforce issue, please contact your relationship attorney or one of Honigman’s Labor & Employment attorneys.