DOL to Withdraw Independent Contractor Rule Effective May 6, 2021

Marty Walsh stated that the withdrawal will “help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect”

Effective May 6, 2021, the Independent Contractor Rule will be withdrawn by the Department of Labor (DOL). The DOL is withdrawing the rule for the following reasons, as stated in their news release.

• The independent contractor rule was in tension with the Fair Labor Standards Act’s (FLSA) text and purpose, as well as relevant judicial precedent.
• The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.
• The rule would have narrowed the facts and considerations comprising the analysis of whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.

For more information about the FLSA and other wage and hour laws, visit the DOL/WHD website or call 1-866-4US-WAGE.

OutSolve's Insight

The OFCCP uses the twelve “Darden” factors to determine whether an individual is an employee or an independent contractor (https://www.dol.gov/agencies/ofccp/faqs/employee-relationship#Q2). Independent contractors need not be included in an AAP, nor counted toward the 50-person AAP threshold).

The now-rescinded rule would have used only five factors to determine employee vs. independent contractor, with heavy reliance on two in particular, worker control over the work, and worker ability to profit or loss. This would have made it easier to exclude workers from AAP coverage.

OutSolve is available to help you with any questions about which employee types to include in an AAP. Please contact us at info@outsolve.com