On May 5, the Department of Labor announced the withdrawal—effective May 6—of the Independent Contractor Status Under the Fair Labor Standards Act final rule, which was issued by the previous administration in January, to maintain workers’ rights to minimum wage and overtime compensation protections of the Fair Labor Standards Act, according to www.dol.gov.
DOL is withdrawing the rule for the following reasons:
- The independent contractor rule was in tension with the FLSA’s text and purpose, as well as relevant judicial precedent.
- The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.
- The rule would have narrowed the facts and considerations involved when analyzing whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.
The FLSA includes provisions that require covered employers to pay employees at least the federal minimum wage for every hour they work and overtime compensation at not less than one-and-one-half times their regular rate of pay for every hour they work over 40 hours in a workweek. FLSA protections do not apply to independent contractors.
Additionally, the department anticipates the independent contractor rule’s withdrawal will avoid a reduction in workers’ access to benefits such as health insurance, retirement plans, unemployment insurance and workers’ compensation coverage.
