DOL Independent Contractor Rule Frozen by Biden Administration

Posted by: Chris

On his inauguration day, President Biden issued a flurry of executive orders and memoranda, including a memorandum that instructed the heads of executive departments and agencies to stop all non-emergency regulatory activity until a review by the new administration could be conducted.

One of the pending rules effectively rolled back by this memorandum was the Department of Labor’s Final Rule issued on January 7, 2021, which created new standards for employers in determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA). This final rule, which was to take effect on March 8, 2021, reduced the number of factors the agency would use to determine whether a worker should be classified as an employee or independent contractor.

The DOL identified two “core factors” in the final rule for determining employment status:

  1. The nature and degree of the worker’s control over the work; and 
  2. The worker’s opportunity for profit or loss based on initiative and/or investment.

These core factors are given greater weight in determining if a worker is economically dependent on someone else’s business or, as a matter of economic reality, is in business for themselves.

The absence of federal guidelines on classification standards for independent contractors has given rise to differing tests and rules across states and in federal courts, further confusing the issue for employers that can face substantial penalties for misclassifying employees as independent contractors.

As part of his presidential platform, President Biden has pledged to work with Congress on establishing a federal standard for independent contractor classification based on the ABC test used by California and several other states to determine worker status:

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed for the company.

An employer would need to establish all three of the above factors in order for a worker to be classified as an independent contractor.

The attorneys at Armstrong & Vaught, P.L.C., are committed to helping workers in Oklahoma protect their workplace rights. Let us hold your employer accountable for violating your rights. Call us now at 918-582-2500, toll-free at (800) 722-8880, or contact us online for a free consultation with a skilled attorney.