Change to Independent Contractor Rule

The U.S. Department of Labor withdrew the changes to the definition of independent contractor implemented during the prior administration. The Independent Contractor Rule sets forth the requirements for when a worker must be considered an employee of an employer (and therefore eligible for certain benefit protections) and when a worker may be treated as an independent contractor, not an employee.

The prior administration loosened the requirements for independent contractor status. This allowed employers to classify more workers as independent contractors instead of employees. 

The DoL stated the following reasons for withdrawing the rule:

• The independent contractor rule was in tension with the FLSA’s 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 whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.

Without the new Rule, the determination of contractor status will revert back to the prior requirements. More workers will be afforded wage and hour protections not available to independent contractors. Employers who engage independent contractors should review their status to ensure proper classification of all workers.