Department of Labor Issues Independent Contractor Rule; Implementation Unclear Under New Administration

The Trump Administration issued a final rule on January 6 that makes it easier for businesses to classify workers as independent contractors.

The U.S. Labor Department’s rule establishes a less restrictive standard for when employers may classify workers as independent contractors rather than as employees. This new regulation has the support of many business organizations but is opposed by workers’ groups seeking policies that would reclassify more independent contractors as employees. Employees are covered by federal minimum wage and overtime laws.

The rule provides five factors to determine whether a worker is economically dependent on an employer. If economically dependent, then the worker would be considered an employee, not an independent contractor.

But the rule could face roadblocks in the Biden Administration.  As a regulation issued in the final weeks of the Trump Administration (a “midnight” rule), it likely will be temporarily stopped from taking effect via a presidential memorandum released on Inauguration Day. The rule is to take effect in early March, but the memo would freeze its implementation, at least for a while.

In the meantime, the Labor Department would likely weigh its options – whether to allow the rule to take effect or essentially do a “redo” of the rulemaking. A new rulemaking would solicit public comments on whether to revise the independent contractor policies.