PIA joined a coalition of allies earlier this week in sending a letter to the Wage and Hour Division of the Department of Labor (DOL), asking the DOL not to withdraw the final rule revising its interpretation of Independent Contractor Status, which was published on January 7, 2021 in accordance with the Fair Labor Standards Act (FLSA). The independent contractor rule was revised by the Trump administration, and the revision was scheduled to go into effect on May 7.
The March 12 Notice of Proposed Rulemaking suggests withdrawing the final rule revising the DOL’s definition of “independent contractor.” The letter urges the DOL to allow the revised rule to go into effect on May 7 as planned. The coalition expresses its support for the final rule and highlights the fact that many professionals, including many independent insurance agents, choose to operate as independent contractors, which helps to cultivate economic growth in the local communities they serve around the country.
The revised independent contractor rule addresses the difference between “employee” and “independent contractor.” That difference determines whether FLSA rules on the federal minimum wage and overtime apply; the FLSA says employers must provide the federal minimum wage and overtime to “employees,” but they need not do so for “independent contractors.”
The longstanding test for whether someone is an employee is based on the “economic realities” of the relationship between worker and employer and considers the totality of the relevant circumstances, including multiple factors. The courts and the DOL both have used that test to determine when a worker is an employee and when a worker is an independent contractor.
The revised independent contractor rule would revise the economic realities test by overlaying it with an economic dependence test, in which, broadly speaking, a worker is considered an employee if they are economically dependent on the employer for work and an independent contractor if the worker is in business for themselves. The revised rule would streamline and simplify the administration of the economic realities test.
PIA will continue to monitor the DOL’s consideration of whether—and if so, how—to revise the independent contractor rule.
Lauren Pachman is Counsel and Director of Regulatory Affairs.