The US Department of Labor on March 11 announced proposals to rescind two final rules established under the Trump administration: the Independent Contractor Final Rule and the regulation determining joint employer relationships under the Fair Labor Standards Act.
Independent contractor classification. The first Notice of Proposed Rulemaking proposes the withdrawal of the Independent Contractor Final Rule issued by the department on Jan. 7. The reasons cited include:
- The rule adopted a new “economic reality” test to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.
- Courts and the department have not used the new economic reality test, and FLSA text or longstanding case law does not support the test.
- The rule would narrow or minimize other factors considered by courts traditionally; making the economic test less likely to establish that a worker is an employee under the FLSA.
The FLSA requires covered employers to pay employees at least the federal minimum wage for every hour worked and overtime premium pay of at least one and one-half times their regular rate of pay for every hour worked over 40 in a workweek. An independent contractor has no FLSA protections, the department noted.
Joint employers. The DOL also seeks to rescind a current regulation on joint employer relationships under the FLSA, which took effect on March 16, 2020. In February 2020, 17 states and the District of Columbia had filed a lawsuit in the US District Court for the Southern District of New York against the department, arguing that the joint employer rule violated the Administrative Procedure Act. The court vacated the majority of the joint employer rule in September 2020, stating that the rule was contrary to the FLSA and was “arbitrary and capricious” due to its failure to explain why the department had deviated from all prior guidance or consider the effect of the rule on workers.
The department invites comments from the public on both proposed rules at www.regulations.gov. The comment periods end on April 12.