Eleventh-Hour Trump Administration FLSA Classification Rule Revived

Just when residential healthcare employers thought it was safe to get back into the classification waters, a late-stage Trump administration rule, “Independent Contractor Status Under the Fair Labor Standards Act [FLSA],”[1] has re-surfaced and caused the Department of Labor (DOL) to reexamine employers’ classification of workers as employees or independent contractors in connection with the FLSA.[2]

Federal Court Overrules the DOL’s Rules Delaying and Withdrawing the Trump Rule

After the Biden administration’s DOL passed rules to delay and withdraw the Trump rule—which had relaxed the parameters for employers to classify workers as independent contractors and thus lawfully avoid paying overtime in certain circumstances—on March 14, 2021, Judge Marcia Crone, U.S.D.J. of the U.S. District Court of the Eastern District of Texas ruled that the Biden DOL violated the Administrative Procedure Act in delaying and withdrawing the Trump rule and reinstated the Trump rule as of March 8, 2021.[3]

The DOL is Holding Forums This Month in Advance of Attempting to Pass a New Rule

Undaunted, the DOL is now revisiting the issue of classifying workers as employees or independent contractors under the FLSA with an eye to passing a new rule that would likely tighten the requirements for legitimate independent contractor status. Toward that end, the DOL is hosting two forums this month: an Employer Forum on June 24, 2022 (2:30 pm – 4:30 pm EST) and a Worker Forum on June 29, 2022 (5:00 – 7:00 pm EST). At these forums, the DOL will receive input from the parties most impacted by a new rule in an effort to ensure appropriate protection for workers under the FLSA.

Any New Rule Will Impact on the Classification of Residential Healthcare Workers

The fundamental differences between employees and independent contractors under the FLSA include, without limitation, whether the worker:

• runs their own business;
• is paid hourly or by project;
• uses their own equipment and tools;
• provides services to one employer or multiple clients; or
• chooses how and when the work is performed.

Notably, these differences were the focus of the DOL’s recent award of nearly $100,000 in back wages to seven healthcare workers employed at a Michigan nursing home that misclassified them as independent contractors and improperly paid them a flat monthly salary.[4] Perhaps even more striking was a ruling from federal court in Virginia ordering a staffing agency serving long-term care providers to pay more than $7.2 million in back wages and damages for failing to properly pay more than 1,100 certified nursing aides, licensed practical nurses, and registered nurses for overtime wages due to them as employees—for nearly seven years—and for failing to keep proper payroll records.[5]

With these kinds of rulings in mind, Residential Healthcare employers should strongly consider participating in the forums hosted by the DOL, as well as any subsequent note and comment periods, so that the impact of a new classification rule on the operations and bottom line of healthcare employers will get the full consideration from the DOL that it deserves.

For more information on this topic, please contact Rich Scharlat at rscharlat@foxrothschild.com.

[1] 86 Fed. Reg. 1168 (Jan. 7, 2021), codified in principal part at 29 C.F.R. §§ 795.100–.120.

[2] 29 U.S.C. § 203 et seq.

[3] Coalition for Workforce Innovation v. Walsh, E.D. Tex., No. 1:21-cv-00130, 3/14/22.

[4] US Department of Labor finds employer’s pay practices denied 7 Michigan residential healthcare workers $94K in back wages | U.S. Department of Labor (dol.gov)

[5] Long-term care staffing agency to pay $7.2 million in back wages, damages after federal court ruling – Business Daily News – McKnight’s Senior Living (mcknightsseniorliving.com)

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