On May 5th, 2021, the U.S. Department of Labor (DOL) announced the withdrawal of the Trump Administration's “Independent Contractor Rule.” According to the DOL, the rule was withdrawn to strengthen the minimum wage and overtime compensation protections of the Fair Labor Standards Act (FLSA). This withdrawal goes into effect on May 6th, 2021.
The rule is being withdrawn for several reasons according to the DOL, including:
- 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.
The FLSA includes provisions that require covered employers to pay employees at least the federal minimum wage for every hour they work and overtime compensation that is at least 1.5 times the employee’s regular pay. The FLSA does not protect independent contractors. The DOL anticipates that withdrawing the independent contractor rule will also avoid other disruptive economic effects that would have been harmful to workers had the Trump Administration's “Independent Contractor Rule” gone into effect.