Compliance Corner

Federal Updates

DOL Withdraws Independent Contractor Rule

May 11, 2021

On May 5, 2021, the DOL announced that it is withdrawing the “Independent Contractor Status Rule” that was first published in the Federal Register on January 7, 2021. This rule established a five-factor test that employers could apply in order to determine independent contractor status. The rule was discussed in an article in the January 10, 2021, edition of Compliance Corner. The rule was under review by the Biden administration pursuant to the administration’s order to re-examine certain proposed regulations promulgated by the previous administration. This order was discussed in an article in the February 2, 2021, edition of Compliance Corner.

The DOL stated that it was withdrawing the rule because it conflicted with the purpose of the Fair Labor Standards Act (FLSA), since the proposed test would make it easier for employers to label workers as independent contractors and therefore no longer subject to that statute’s worker protections. Two of the factors in the proposed test, which focused on whether a worker had control over their work and whether the worker had an opportunity to earn profits or incur losses, shifted the focus of the analysis from reviewing the totality of the circumstances surrounding the employer-worker relationship to a narrower approach which the agency felt flew in the face of longstanding practice and court precedent.

The DOL stated that by withdrawing the rule, the agency preserves essential worker rights and prevent more workers from losing or experiencing reduced benefits such as health insurance and retirement plans.

Employers who were considering the proposed rule’s impact on benefits administration should be aware of this action. Employers should consult with employment law counsel if they have further questions concerning the withdrawal.

DOL Announcement »
Federal Register Withdrawal »