Department of Labor Formally Withdraws Independent Contractor Rule

Following a regulatory freeze during which the Department of Labor (DOL) announced it would delay implementation of its Independent Contractor Rule until May 7, 2021 and consider withdrawing the rule altogether, DOL has now formally announced the rule withdrawal. Because the Independent Contractor rule had not yet been implemented, this should not change how our members fulfill their obligations as employers should they employ independent contractors. However, we recommend that our members seek legal counsel if they have specific questions on this issue.

As announced by DOL:

“The U.S. Department of Labor today announced the withdrawal – effective May 6 – of the “Independent Contractor Rule,” to protect workers’ rights to the minimum wage and overtime compensation protections of the Fair Labor Standards Act (FLSA).

The Department is withdrawing the rule for several reasons, including:

• The independent contractor rule was in tension with the FLSA’s text and purpose, as well as relevant judicial precedent.
• The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.
• The rule would have narrowed the facts and considerations comprising the analysis whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.

Withdrawing the independent contractor rule will help preserve essential workers’ rights. The FLSA includes provisions that require covered employers to pay employees at least the federal minimum wage for every hour they work and overtime compensation at not less than one-and-one-half times their regular rate of pay for every hour over 40 in a workweek. FLSA protections do not apply to independent contractors.

In addition to preserving access to the FLSA’s wage and hour protections, the department anticipates that withdrawing the independent contractor rule will also avoid other disruptive economic effects that would have been harmful to workers had the rule gone into effect.

For more information about the FLSA or other laws enforced by the Wage and Hour Division, visit https://www.dol.gov/agencies/whd, or call toll-free 1-866-4US-WAGE.”