As Expected, DOL Delays Independent Contractor Final Rule

Jackson Lewis P.C.

On March 2, 2021, the U.S. Department of Labor (DOL) formally delayed the effective date of the Independent Contractor Final Rule, from March 8, 2021 to May 7, 2021. The Final Rule, published during the last two weeks of the prior administration, provides that “an individual is an independent contractor, as distinguished from an ‘employee’ under the Act, if the individual is, as a matter of economic reality, in business for him or herself.” Under the Rule, the “economic dependence” inquiry focuses on five, non-exclusive factors, two of which are considered primary – the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss – and three additional factors that come into play if the first two factors are inconclusive: the amount of skilled required, the “degree of permanence” of the parties’ work relationship, and whether the putative employee’s work is “part of an integrated unit of production.” The actual practices of the working relationship, and not what the parties’ contract may theoretically allow, is emphasized.

Although only a minority of the more than 1,500 comments supported the proposed delay, the DOL concluded that “allowing more time for consideration of the [] Rule is reasonable given the significant and complex issues the [] Rule raises, including whether the [] Rule is consistent with the statutory intent to broadly cover workers as employees as well as the costs and benefits of the rule, including its effect on workers.” Ultimately, the Final Rule as currently constituted may be revised to make it more difficult to classify workers as independent contractors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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