DOL Proposes Rescinding Joint Employer and Independent Contractor Rules

DOL hopes to go back to older definitions of Joint Employer and Independent Contractor

On March 11, 2021 the Department of Labor (DOL) announced proposals to withdraw the following two rules under the FLSA that were recently issued.

Independent Contractor Rule

The DOL issued the independent contractor rule on January 7, 2021 which adopted a new “economic reality” test to determine whether a worker is an employee or an independent contractor. The rule was scheduled to take effect on March 8, 2021; however, on March 2, 2021, the DOL published a final rule pushing its effective date to May 7, 2021. According to the agency, neither the courts nor the department have used the new economic reality text. For more information, read our blog.

Joint Employer Rule

The joint employer rule took effect on March 16, 2020 and established a four-factor balancing test for determining joint-employer status under the FLSA; however, made it clear that no single factor is dispositive in determining status.

In February 2020, 17 states and the District of Columbia filed a lawsuit arguing that the Joint Employer Rule violated the Administrative Procedure Act. On September 8, 2020 the U.S. District Court for the Southern District of New York vacated the majority of the rule. That decision is currently on appeal to the Second Circuit Court of Appeals.

The public may comment on both proposed rules by April 12, 2021.

OutSolve's Insight

As a general proposition, the OFCCP does not expect an employer to include independent contractors in its affirmative action plan (AAP). The “economic reality” test would have made it easier for employers to classify individuals as independent contractors. The “Common Law Agency” test, which the OFCCP uses (https://www.dol.gov/agencies/ofccp/manual/fccm/key-words-and-phrases ), includes more individuals as employees. OutSolve’s team of experienced affirmative action consultants can assist you with these types of questions and all other AAP related practices.