UPDATED 4/12/22: On March 14, 2022, a federal court held that the DOL unlawfully delayed and withdrew the independent contractor final rule (which did not take effect prior to the DOL’s withdrawal). As a result of the court’s decision, the independent contractor rule became effective retroactively as of March 8, 2022 (its original effective date). The court’s ruling may be challenged or appealed, or alternatively, the DOL may undertake formal rulemaking that will change the final rule. As such, the independent contractor analysis remains uncertain.
UPDATED May 2021 – The U.S. Department of Labor announced the formal withdrawal of the prior administration’s “Independent Contractor Rule,” interpreting independent contractor status for purposes of the minimum wage and overtime compensation protections of the Fair Labor Standards Act.
On January 7, 2021, the U.S. Department of Labor (“DOL”) issued its Final Rule interpreting independent contractor status for purposes of the Fair Labor Standards Act (“FLSA”). The Final Rule largely mirrors the DOL’s proposed rule announced in September 2020, setting forth the “economic reality” test, which looks at whether a worker is economically dependent on the employer for work or whether the worker is in business for themselves. For an overview of the proposed rule, please visit our blog. The rule is set to take effect on March 8, 2021, however, the new administration under President Biden will likely seek to offer its own interpretation and rulemaking on this crucial question.
On January 20, 2021, the Biden White House issued a memorandum to all executive departments and agencies requesting that they freeze all non-emergency rulemaking and regulatory activity pending review by the incoming administration. This freeze will include the prior administration’s Final Rule on independent contractor analysis. The Biden administration has also publicly indicated its intention to work with Congress on developing a federal standard for independent contractor classification likely to be resemble what is commonly known the “ABC test” (such as the test adopted in California, Assembly Bill 5) as opposed to what was set forth by the DOL under the prior administration.
Given the importance of worker classification, employers are encouraged to consult with counsel on their existing agreements with independent contractors.
- Independent Contractor Status under the Fair Labor Standards Act
- Sequoia Blog: DOL Proposes New Rule on Independent Contractor Analysis
- Sequoia Blog: California Passes AB5
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved