DOL Rescinds President Trump’s Independent Contractor Rule

On May 6, 2021, The U.S. Department of Labor issued a final rule rescinding the independent contractor regulation without replacing it with a new interpretation of when workers can function as independent contractors and when they must be classified as employees under federal law, who are entitled to minimum wage and overtime pay. In deciding questions of employee status, the Biden administration will now rely on a longstanding multi-factor test established by judicial precedent. Per DOL Secretary Walsh, “by withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect.” This rule under the Trump Administration would have allowed companies to use an updated economic realities test to settle classification questions. It included five factors, but two were given far greater weight: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment.