DOL Rolls Back Trump Administration’s Independent Contractor Rule

05 May 2021 Labor & Employment Law Perspectives Blog
Authors: John R. FitzGerald Larry S. Perlman

Employers who have been following the Department of Labor’s (DOL) guidance on independent contractors may feel that they are sitting on a playground seesaw.

As we previously reported this past January, in the waning days of the Trump administration, the DOL issued a final rule (the Rule) on Independent Contractor Status under the Fair Labor Standards Act (FLSA). The Rule modified the DOL’s test for classifying workers as employees or independent contractors for purposes of the FLSA, making the test broader and friendlier to employers. Specifically, the agency adopted a five-factor test but emphasized two factors as most important: (1) the nature and degree of the individual’s control over the work, and (2) the opportunity for profit or loss.

At the time, we cautioned that employers’ sense of joy over the Rule might be short-lived, given the incoming administration’s stated commitment to roll back Trump-era actions that it perceived as negatively impacting workers; such caution was well-advised. On May 5, 2021, the DOL announced a new final rule, withdrawing the January 2021 Rule. The withdrawal takes effect on May 6, 2021.

According to the Biden administration’s DOL, it is withdrawing the Rule because it is inconsistent with the FLSA’s purpose and text, and because no court has yet followed the Rule’s approach when analyzing whether a worker is an employee or an independent contractor under the FLSA. Also, because the Rule allows more workers to be classified as independent contractors and thereby reduces the number of workers protected by the FLSA, the withdrawal is in accordance with President Biden’s agenda to expand protections for employees.

The DOL has not put forth any new guidance with respect to independent contractor classification, meaning that for the time being employers should look to prior DOL guidance with respect to independent contractor classification, including is the DOL’s Fact Sheet 13: Employment Relationships Under the Fair Labor Standards Act (FLSA). That guidance provides a seven-factor test, which is less forgiving in terms of classification issues and does not identify any factor or factors as carrying more weight than the others.

We will keep you updated on further changes with respect to this ever-evolving area of law.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services

Insights