Thursday, May 6, 2021

DOL withdraws Trump-era proposed independent contractor rule

We've got an early contender for least surprising news of the year... DOL is withdrawing the Trump-DOL independent contractor rule. You can read all about the now-dead proposed rule in my prescient January 7, 2021 entry (okay, you didn't need a crystal ball to see this one comin'), DOL publishes new independent contractor rule, but is it DOA? That rule is withdrawn, effective today.

So, where are we now? Well, the "supplementary information" in the formal withdrawal notice in the Federal Register points us to the "economic realities" test. This test distinguishes between independent contractors, who are "engaged in a business of [their] own," and employees, who "as a matter of economic realities are dependent upon the business to which they render service." The notice provides a fair amount of analysis, and identifies some specific factors:

(1) The degree of the employer's right to control the manner in which the work is to be performed; 
Not official use.
(2) the worker's opportunity for profit or loss depending upon his or her managerial skill; 
(3) the worker's investment in equipment or materials required for his or her task, or employment of helpers; 
(4) whether the service rendered requires a special skill; 
(5) the degree of permanence of the working relationship; and 
(6) whether the service rendered is an integral part of the employer's business.

That said, the list is not exhaustive, and different courts have utilized assorted variations. 

Bottom line: If you thought the proposed rule from January was going to make classifying workers as independent contractors easier - well, it's not, because that rule's dead now. There's nothing groundbreaking in the withdrawal though. As always, I have a few caveats:

  • This notice applies to classification of workers under the FLSA - different courts and agencies apply different tests when analyzing classification under different statutes;
  • Even under the FLSA, the federal courts have tended to do their own thing and not give too much deference to ever-changing views of the DOL;  and
  • Even the DOL changes its mind sometimes. 
That said, this latest notice provides insight into the DOL's views on classification, and some factors for businesses to consider when classifying workers. 

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