DOL Withdraws Rules for Determining Independent Contractor Status

On May 5, 2021, the Department of Labor (DOL) announced the withdrawal of the new independent contractor rule.

The withdrawal of the rule will be effective on May 6, 2021.

Rules proposed and finalized under the previous administration were intended to clarify the standards for employee versus independent contractor under the Fair Labor Standards Act (FLSA) and were slated to be effective March 8, 2021. In January, the Biden administration asked all federal agencies to consider postponing the effective date of rules that have been issued but not effective to allow the president’s appointees an opportunity to review new or pending rules.

According to the DOL, after reviewing comments, it decided to finalize the withdrawal of the independent contract rules. The DOL provides the following reasons for withdrawing the rule:

• 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.

Remember, the determination of whether a worker is an independent contractor or employee depends on the facts in each situation and must be done on a case-by-case basis. For more information on the topic, visit Independent Contractors in the HR Library (TASB login required).