U.S. Department of Labor Repeals Trump-Era Rule Favoring Independent Contractor Status, as Expected

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Stoel Rives - World of Employment

As expected, the U.S. Department of Labor (DOL) has repealed the Trump-era rule regarding classification of independent contractors.  As we discussed here, the Trump-era rule codified the “economic realities test” for use when analyzing whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA).

Labor advocates criticized the rule as favoring classification of workers as independent contractors as opposed to employees; only employees are protected by most employment-related laws, including the FLSA.  Under the FLSA, employees – but not independent contractors – are entitled to minimum wage, overtime pay and other protections.  Instead, independent contractors have comparatively greater flexibility over how, when and where they perform their work as compared to employees, and can work for multiple companies.

In repealing the Trump-era rule, the Biden DOL stated that it “believes that the rule is inconsistent with the FLSA’s text and purpose and would have a confusing and disruptive effect on workers and businesses alike due to its departure from longstanding judicial precedent.”

It remains to be seen whether the DOL will propose a new independent contractor rule.  If it does, the rule may look like the “ABC” test that is used in some states such as California, Illinois, Massachusetts and New Jersey, and which is generally considered to be employee-friendly and hostile to independent contractors.  In short, the ABC test comes with a presumption that a worker is an employee and puts the burden on the employer to demonstrate the worker is free from its direction and control and is in fact an independent contractor.  President Biden has expressed support for the ABC test, but there are no indications yet that the DOL will propose a rule to codify it.  We will continue to monitor these developments.

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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