Dive Brief:
- Field staff for the U.S. Department of Labor’s Wage and Hour Division will not apply the agency’s 2024 independent contractor rule in their enforcement of the Fair Labor Standards Act, a DOL bulletin announced Thursday.
- Instead, the department directed staff to apply a 2008 fact sheet as well as a 2019 opinion letter to any matters in which no payments for back pay or civil monetary penalties have been made to either individuals or DOL.
- The agency said it is still considering rescinding the Biden administration’s rule, which faces ongoing litigation. “Until further action is taken, the 2024 Rule remains in effect for purposes of private litigation and nothing in this FAB changes the rights of employees or responsibilities of employers under the FLSA,” DOL noted.
Dive Insight:
As with other DOL regulations adopted during the Biden administration, the Trump administration seems poised to ditch the independent contractor rule. A shift on the subject would extend a regulatory see-saw that dates back several election cycles.
The rule took effect in March 2024 despite legal challenges filed by several business groups, and federal judges dismissed several such challenges in the months that followed. While that litigation continues, at least one case challenging the rule — on appeal in the 5th U.S. Circuit Court of Appeals — has been placed on hold.
The Biden administration sought to expand federal wage-and-hour protections to workers whom it believed were misclassified as independent contractors. DOL adopted a “totality-of-the-circumstances” framework for evaluating whether a worker is properly classified as an independent contractor. It sets forth six nonexhaustive factors for the agency to consider when evaluating the relationship between a worker and potential employer:
- Worker’s opportunity for profit or loss.
- Investments made by the worker and the employer.
- Degree of permanence of the work relationship.
- Nature and degree of control over performance of the work.
- Extent to which the work performed is an integral part of the employer’s business.
- Use of the worker’s skill and initiative.
DOL’s rule replaced a previous rule issued by the first Trump administration. In 2020, the then-Trump-era DOL published a rule establishing an “economic reality” test for evaluating worker-employer relationships, which in turn focused on two core factors — the nature and degree of a worker’s control and profit-or-loss opportunity — as well as three “additional guideposts.” The Biden-era DOL ultimately rescinded that rule.
Both of the documents cited by the Trump administration Thursday maintain an economic reality analysis for independent contractor relationships with a list of factors roughly similar to those included in the 2024 rule. One of the documents, a 2019 opinion letter in which DOL clarified that service providers of a virtual marketplace company were independent contractors, has been similarly rescinded by the Biden administration.
