Independent Contractor Rule Goes into Effect

On Monday, the U.S. Department of Labor’s closely watched independent contractor rule went into effect, but do not expect too much of a change from the DOL’s current enforcement position.  Up until today, the Trump-era independent contractor standard was the regulation on the books governing the DOL’s approach to determining whether a worker should be classified as an employee or independent contractor for purposes of the Fair Labor Standards Act.

Businesses have preferred the Trump test because it outlined five factors in the working relationship that agency enforcement officials were to consider when determining a worker’s status, a simpler approach than the new rule, which generally allowed companies to maintain their current independent contractor relationships.

The now-effective Biden administration independent contractor rule replaces that test with a stricter six-factor approach, which the agency says is more aligned with case law and is needed to help prevent worker misclassification. But management-side attorneys have complained that the DOL was already looking at more than the five factors when bringing worker misclassification enforcement actions before the most recent rule was finalized.

The agency also noted in its rulemaking that the economic realities approach cemented in its latest rule is a test that’s been used by the courts and the department since the 1940s.