Independent Contractor Status Under the FLSA Being Reviewed by Biden DOL

The Department of Labor (DOL) under the Biden administration is reviewing and perhaps reconsidering the final rule promulgated by the Trump administration DOL entitled, "Independent Contractor Status Under The Fair Labor Standards Act." That final rule was announced January 6, 2021 and was to become effective on March 8, 2021. As we described in a prior eTrend, the final rule would make it easier for employers to classify workers as independent contractors rather than employees because it would emphasize two "core factors" — the nature and degree of the worker’s control over the work and the worker’s opportunity for profit or loss — and only apply the additional factors previously used by most courts and the DOL if the two core factors did not point to the same classification. Independent contractors are not entitled to the minimum wage and overtime protections provided by the Fair Labor Standards Act.

The effective date of the new rule was delayed until May 7, 2021. According to the DOL, the delay is intended to give the Department "additional opportunity for review and consideration" of the rule. (DOL Announcement 2/19/2021) On February 19, 2021, the DOL withdrew Opinion Letter FLSA2019-6 that was issued by the Trump DOL in April 2019 and in which the DOL concluded that workers for a virtual marketplace company were independent contractors. The company that had requested the opinion letter used its virtual platform to connect service providers to consumers. In the opinion letter, the DOL applied the same factors that were subsequently adopted in the independent contractor rule to determine that the workers could be classified as independent contractors. In withdrawing the opinion letter last week, the Biden DOL noted, "Opinion Letter FLSA2019-6 addressed the same issue under consideration by the Department—independent contractor status under the FLSA. Consistent with its proposed delay of the final rule, [the Wage and Hour Division of the DOL] is withdrawing this opinion letter." (Id.) Although opinion letters are not binding on a court, courts generally defer to the agency’s interpretation of the subject regulation or law. The withdrawal of an opinion letter means that employers cannot rely on the letter in defending an enforcement action.

The withdrawal of Opinion Letter FLSA2019-6 and the delay of the effective date of the independent contractor rule indicate that the Biden DOL may revert to the position of the DOL under the Obama administration which was that most workers are employees entitled to the protections of the Fair Labor Standards Act. Employers should continue to monitor the DOL’s position on independent contractors and make certain that their workers are appropriately classified under the FLSA and any applicable state laws.

For additional information concerning classification of workers, please contact the Smith Anderson lawyer with whom you normally work.