From JDSupra, Meredith Dante, Jessica Federico and Mary O’Brien discuss the United States Department of Labor’s (“DOL”) announcement of the delay of the effective date of the new rule for classifying independent contractors. Meredith, Jessica, and Mary write:
On March 2, 2021, the United States Department of Labor (“DOL”) announced that it is officially delaying the effective date of the rule titled “Independent Contractor Status under the Fair Labor Standards Act.” The effective date for the rule has now been delayed 60 days from March 8, 2021, to May 7, 2021.
As we previously reported here, the Independent Contractor Status under the Fair Labor Standards Act rule was published on January 7, 2021, under former President Trump. The rule would have narrowed the existing “economic reality” test for establishing independent contractor status to two main factors—the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss. However, upon taking office, President Biden froze all pending regulatory action, calling for a review.
Notably, President Biden campaigned on the promise of creating a federal standard for independent contractor classification, a standard that he indicated would be consistent with the stringent “ABC” test, rather than the more lax “economic reality” test. During the upcoming 60-day delay in implementation of the rule, it is quite possible that the Biden Administration will re-open the rulemaking process. If the Trump-era rule is ultimately rescinded and replaced by a new test to determine independent contractor status, the new test is very likely to be worker-friendly, making it more difficult for businesses to treat their workers as independent contractors.