Reminder: Final Biden Administration Independent Contractor Rule Takes Effect March 11 – ‎Do Not Fear, But Don’t Stand Still 

From JDSupra, Richard Reibstein reminds readers that the new independent contractor rule is effective on March 11, that it does not change the law, and that it merely expresses the Department of Labor’s interpretation of existing case law. Richard writes:

On January 9, 2024, the same day the U.S. Department of Labor issued its final rule on independent contractor status, we published a comprehensive blog post analyzing and commenting on the new regulation, which goes into effect less than a week from now on March 11, 2024. We have received heard from numerous clients that have an IC business model, expressing concern that the legal landscape will change on that date. It won’t. As we noted in our January 9 post, “The legal impact of the final rule … will hardly ripple the waters. After all, it is the courts that create law on this subject, not regulatory agencies.” But we also cautioned that “the final rule issued today will give renewed impetus to disaffected workers classified as independent contractors to file class actions seeking minimum wage, overtime payments, and employee benefits under applicable laws.” We commented further that “This is likely to propel more companies using independent contractors to take steps to enhance their IC compliance by using a process such as IC Diagnostics (TM) to restructure, re-document, and re-implement their relationships with ICs in a customized and sustainable manner, consistent with their business model.” That is exactly what we have seen – more companies have been attacked by IC misclassification lawsuits while at the same time more companies are seeking to maximize their compliance with laws governing ICs.

As we have commented recently in an article in another publication, there have been a number of legal challenges filed in federal courts seeking to enjoin the final federal IC rule scheduled to go into effect next Monday. It is unlikely any of those court challenges will lead to an injunction prior to March 11.

Our January 9 blog post summarized the new rule, explained how it differed from the Trump Administration rule it replaced, explained why the new rule would have virtually no legal significance, and provided key takeaways for businesses that have an IC business model. There is no need to repeat the text of that blog post here. The purpose of this post is to reassure businesses that there is no reason to be concerned that any law is changing. The 2024 regulation does not change the law; it is essentially an interpretation by the Labor Department of the Fair Labor Standards Act that the federal courts are unlikely to follow to the extent the new rule differs from the courts’ own legal precedents.

In sum, if your IC relationships were arguably compliant with applicable state and federal statutes before the issuance of 2024 final regulation two months ago, or have been enhanced in the first two months of this year, you can stand pat. But if you have not taken steps recently to minimize IC misclassification liability, now is the time – especially if you have not yet included an arbitration clause with a class action waiver in your IC agreements or updated your existing arbitration provisions. A savvy company that takes those types of IC Diagnostics measures in the coming months can even message to its contractors that, while not legally required to do so, it is updating its IC agreements and taking steps to improve its implementation of its IC relationships in view of the 2024 final regulation governing IC status under federal law.

Source: Reminder: Final Biden Administration Independent Contractor Rule Takes Effect March 11 – ‎Do Not Fear, But Don’t Stand Still | Locke Lord LLP – JDSupra

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