U.S. Department of Labor Announces Final Rule to Clarify Independent Contractor Status ‎Under the Fair Labor Standards Act
Earlier this week, the US Department of Labor (DOL) released the text of the Wage and Hour ‎division’s final rule on Independent Contractor status under the FLSA. You can find the full ‎text of the rule here.‎

CLDA’s comment to the Department of Labor was quoted in the text of the final rule (page ‎‎36 of the PDF). However, our analysis indicates that the DOL has not incorporated the ‎requests by CLDA and many others to significantly refine the particulars of the rule text as it ‎was initially proposed.‎

Specifically, CLDA proposed the following:
  • Make changes to the “Actual Practice” provisions of the rule, which could have ‎ penalized ICs who provided services to only one company at a time. ‎
  • Add a “presumption of IC status” if both of the new core factors pointed to IC status.‎
  • Suggested to fully get rid of the integral part factor (as they suggested they had considered ‎removing it entirely).‎
  • Add language clarifying that an IC who signs consecutive contracts with a business is not ‎considered an “employee” under the permanence factor. ‎
Without incorporating our proposed changes, we do not see this final rule as helping our industry. We also see a risk that the Trump administration’s decision to proceed with the rule as written may provoke a more harmful response from the incoming Biden administration.

President-elect Joe Biden's DOL leaders will have the authority to suspend the rule along with any other Trump administration regulation that has not taken effect before the transfer of power on January 20. In fact, on December 30, President-elect Joe Biden’s incoming press secretary cited the independent contractor regulation as one of the “midnight” rules that would be potentially frozen from taking effect on Inauguration Day.
Since the rule will not take effect until 60 days after it was published in the Federal Register, this can easily be frozen. However, the process will get more difficult from there. If Biden chooses to freeze the rule for an extended period, it could make his Labor Department vulnerable to an industry lawsuit alleging that it violated the Administrative Procedure Act by not allowing the Trump rule to take effect. It has been reported that the business lobby is already gearing up for litigation to defend the outgoing administration’s regulation.
The Biden Labor Department might have other options at its disposal, depending on how the situation plays out. The Trump administration rule may be the target of a lawsuit by a coalition of Democratic state attorneys general, who have already argued against the proposal’s legality. If blue states convince a judge to vacate the rule, as they did with a DOL standard on joint employment, this would block it from taking effect regardless of a Biden administration move to freeze it.
The DOL could then issue a new proposed rule that would apply a broader interpretation about the types of workers who must be classified as employees rather than independent contractors – without needing to worry about the legality of delaying the Trump rule indefinitely.
CLDA’s Government Affairs team will continue to monitor and respond to this situation as it develops in the coming year. This rule was a last-ditch effort by the Trump-era political appointees installed in the DOL to resolve some of the issues raised by the legal grey areas that surround IC classification. It seems increasingly unlikely that the rule as written will ever take effect.

However, if the Biden administration does reopen the matter, CLDA will stand ready to advocate for the best interests of our members with all the resources available to us.