Remember the Trump administration’s new rule for classifying workers as independent contractors?  The one issued on January 6, 2021, only weeks before President Biden took office?  The one that would have revised the U.S. Department of Labor’s test for determining worker status under the Fair Labor Standards Act to focus on two “core factors” (control and opportunity for profit and loss), and de-emphasized the other factors traditionally considered as part of the “economic realities” test?  The one that was scheduled to take effect on March 8, 2021, and then delayed to May 7, 2021?  It’s officially gone.

As we anticipated back in February, the DOL announced the official withdrawal of the rule today, effective May 6, 2021.  Per the DOL’s Final Rule, which is expected to be published in the Federal Register tomorrow:

  • The rule was in tension with the FLSA’s text and purpose, as well as judicial precedent.
  • The rule’s prioritization of two “core factors” for determining employee status would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances.
  • 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.

So what’s next?  The DOL is not proposing any new independent contractor rule at the moment.  That means that the agency will consider the “economic realities” test to be the governing standard.  Prior to the Trump administration, the DOL considered the following six factors as relevant to the analysis:

  1. the extent to which the work performed is an integral part of the employer’s business;
  2. the worker’s opportunity for profit or loss depending on his or her managerial skill;
  3. the extent of the relative investments of the employer and the worker;
  4. whether the work performed requires special skills and initiative;
  5. the permanency of the relationship; and
  6. the degree of control exercised or retained by the employer.

See, e.g., DOL Wage and Hour Division Administrator’s Interpretation No. 2015–1 (July 15, 2015), withdrawn by the Trump DOL on June 7, 2017.

The good news is that given the change in administration and the delayed effective date of the Trump-era rule, most employers had not changed their classification practices based on the rule.  The reality is that any federal rule won’t make a material difference in states (like California) that have a more stringent test for independent contractor classification.  Still, the withdrawal of the rule is yet another reminder that a focus of the current federal administration won’t be to narrow the coverage of the wage and hour laws—quite to the contrary.

Proskauer’s Wage and Hour Group is comprised of seasoned litigators who regularly advise the world’s leading companies to help them avoid, minimize, and manage exposure to wage and hour-related risk.  Subscribe to our wage and hour blog to stay current on the latest developments, and check out the latest Biden administration developments impacting employers on Proskauer’s Law and the Workplace blog.

 

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Photo of Allan Bloom Allan Bloom

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended…

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended many of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration, before government agencies, and in private negotiations. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York Times, Reuters, Bloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved billions of dollars in potential damages.

Allan is regularly called on to advise operating companies, management companies, fund sponsors, boards of directors and senior leadership on highly sensitive matters including executive and key person transitions, internal investigations and strategic workforce planning. He has particular expertise in the financial services industry, where he has litigated, arbitrated, and mediated disputes for more than 20 years.

A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA), Employment Discrimination Law (ABA/Bloomberg BNA), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE).

Allan has served as longtime pro bono counsel to Lincoln Center for the Performing Arts and The Public Theater, among other nonprofit organizations.  He is a past Vice Chair of Repair the World, a nonprofit organization that mobilizes volunteers and their communities to take action to pursue a just world, and a past recipient of the Lawyers Alliance Cornerstone Award for extraordinary contributions through pro bono legal services.

Allan is a Fellow of the College of Labor and Employment Lawyers and has been recognized as a leading practitioner by Chambers since 2011.