Last week, the Department of Labor (DOL) announced its decision to withdraw a planned revision of the regulation governing the definition of independent contractors. The withdrawal decision was made in response to the publication by the Wage and Hour Division of the DOL of a proposed final rule revising its interpretation of the definition of Independent Contractors on January 7, 2021, at the behest of the Trump administration.
About a month ago, in response to the DOL’s proposed withdrawal of the new definition, PIA joined a coalition of allies in sending a letter to the Wage and Hour Division requesting that it not withdraw the rule, which would have revised the relevant provisions of the Fair Labor Standards Act (FLSA). The letter was responding to a Notice of Proposed Rulemaking that suggested withdrawing the final rule. You can find more details about how the rule would have changed the definition of “independent contractor” here. The revision was scheduled to go into effect on May 7.
The immediate effect of the DOL’s decision is that the current test for whether someone is an employee will remain in effect. That test 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 the existing test to determine when a worker is an employee and when a worker is an independent contractor.
Despite the DOL’s recent decision, the definition of an independent contractor is far from settled. In March, the Coalition for Workforce Innovation, Associated Builders and Contractors of Southeast Texas, and Associated Builders and Contractors Inc. filed a complaint challenging the rule’s delay. The same day DOL announced the repeal, the Financial Services Institute joined the federal suit, which is pending in the Eastern District of Texas.
PIA will continue to monitor the ongoing legal battle and any potential future DOL consideration of whether—and if so, how—to revise the independent contractor rule.