February 26, 2021
The Association filed comments with the Department of Labor strongly recommending that it scrap proposed plans to delay the previous administration’s final rule on independent contractor status under federal law.
The final rule, which was instituted near the end of the Trump administration, clarified the proper standard for determining independent contractor status under the Fair Labor Standards Act. Under the rule, determining whether a worker is an employee or independent contractor is dependent on the degree of control exercised by either party and the worker’s opportunity for profit or loss. The Association filed comments largely in support of the rule when it was originally proposed.
The rule was supposed to become effective March 8, 2021. Soon after assuming office, President Biden issued an executive memorandum directing the Department of Labor to freeze the effective date of the rule. This was followed by a DOL Notice of Proposed Rulemaking that proposed delaying the effective date to May 7, 2021, and invited comments on the proposed delay.
In its filed comments, the Association urged the Department to make the rule effective as originally scheduled. We emphasized the much-needed clarity the rule brings, and noted that delaying implementation of the rule would only lead to continued inconsistency and prolonged uncertainty for American workers and employers regarding worker classification.
Outlook: It is widely expected that the Biden administration will freeze the independent contractor rule indefinitely and eventually replace it with its own regulation adopting a much stricter test for independent contractor status. It is anticipated that the Department will adopt something close to the so-called ABC test, which limits independent contractor status to individuals performing work that is “outside the employer's usual course of business.” The new administration has also repealed a pair of interpretative letters issued by the Trump DOL’s Wage and Hour Division that stated gig workers were independent contractors under federal law. Employers should remain alert for further policy movements from the Biden administration on the misclassification issue in the coming year.