On March 11, 2021, the U.S. Department of Labor (DOL) announced a proposal to rescind the Independent Contractor final rule. The rule was originally published in January, but its effective date has been delayed as the result of a freeze the Biden administration ordered on regulatory changes adopted late into the previous administration.
The independent contractor final rule would require employers to use an economic reality test to gauge financial dependency in an employment relationship to determine whether workers should be classified as employees or independent contractors.
After its review, the DOL stated that implementing this rule would “significantly weaken” worker protections under the Fair Labor Standards Act (FLSA).
The DOL found that using the economic reality test would narrow or minimize the importance of factors not used by the economic reality test. The DOL and the courts have traditionally favored other factors to establish the true nature of the employment relationship between workers and their employers.
Next Steps for Employers
At this stage, rescission of the rule has only been proposed and is not final. The DOL will review and consider public commentary on this matter which closed on April 12, 2021.
Employers should continue to monitor the DOL website for updates on this and other labor and employment developments.
HR Works will also continue to monitor any developments and provided updated information as it become available.
