September 08, 2022
DOL to Publish New Independent Contractor Rule

Acting director of the Wage and Hour Division, Jessica Looman, announced the agency will issue a new final rule defining who is an independent contractor under the Fair Labor Standards Act (FLSA). This long-delayed announcement seeks to end the administration’s halting efforts to repeal and replace the last-minute Trump administration independent contractor regulation.

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Battle over Trump Rule

The Trump administration rule on independent contractors was issued on January 7, 2021. The Biden administration first delayed and then withdrew the rule in May 2021. Eight months later, a district court vacated the efforts to supplant the Trump rule, deciding it became effective on its original effective date, March 8, 2021, and remains in effect. The U.S. Department of Labor (DOL) appealed that ruling, and the appeal is currently pending.

Many observers believed a new regulatory process would be announced immediately, as a new rule was to be a linchpin in the President Joe Biden’s pro-worker, pro-union agenda by significantly expanding the number of workers able to join unions and/or gain the protections of federal labor, pension, and civil rights laws.

More clarity on this issue is one of the most important subjects for employers and employees. It is not too much to say a change in the definition of who is an employee will reverberate throughout the economy. It will shape every workforce, affecting who and how many people are hired and how they are paid. A new rule by the Biden DOL will also assist in union organizing efforts. Although any change is sure to be controversial, many commentors have noted that current labor and employment laws do not reflect the changes to the workplace that have occurred in recent decades.

The increased mobility of work and workers, remote work, the “gig economy,” globalization, the change in manufacturing—all of which have led to a shift in the traditional employment relationship—are not yet encompassed in federal law. Yet efforts to promulgate a new regulation are expected to be made even more difficult as a result of the U.S. Supreme Court’s most recent decision on regulations.

DOL’s Authority to be Challenged?

In addition to the recognized difficulty of drafting and promulgating a new regulation, the Supreme Court’s new ruling on the limits of agency authority (West Virginia v. EPA) will surely provide new grounds for challenging any new regulation the DOL issues. As a new independent contractor rule would significantly affect the national economy, it would surely be a “major question.” As a result, the clarity of congressional delegation and the breadth of the secretary’s authority to regulate will be assessed by judges and Justices.

Further, whatever new rule is finally issued, it would not end the debate and the divisiveness on this matter. The new final DOL rule would apply only to the FLSA and not redefine who qualifies as an independent contractor under the Internal Revenue Code or the National Labor Relations Act (NLRA). In fact, the National Labor Relations Board (NLRB) is currently planning its own independent contractor rule and adjudicating a case that would have a similar impact. In addition, the federal rule would not affect the right of states, such as California, to promulgate their own definitions.

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