What will the Impact of the Proposed Independent Contractor Rule Really Be?

In October, the United States Department of Labor (DOL) proposed a new rule for classifying workers as employees or independent contractors. Since the announcement, some commentators have described it as an attack on gig workers (see, for example, Biden declares war on Lyft and Uber, and Biden’s attack on gig work is an Uber mistake), others have predicted doom and gloom, and others hail it as a victory for workers and unions.

While the posturing and rhetoric is entertaining, most of the time its superficial and reflects a political perspective more than a legal analysis. To say that this proposed rule will lead the Biden administrtaion to classify more workers as employees is more a chicken/egg question. The Biden administration was going to consider more workers to be employees than the Trump administration, with or without a new proposed rule. The rule may be evidence of the Biden administration’s position, but the rule didn’t cause it and won’t have much of an effect on it. 

To try to guage the true impact of the rule, I looked for analyses by attorneys who have gone beyond the general statements such as “more workers will be classified as employees” or “employers should review their classification of workers.” I looked for predictions on how courts will interpret the proposed rule because ultimately courts are responsible for applying and interpreating the law and applicable regulations. While the the proposed rule may signal the DOL’s approach in audits or enforcement activities, ultimately the determination as to whether a worker is an employee or independent contractor is made by a court. 

I found five articles authored by attorneys that offered their opinion on the impact of the new rule is a little more detial than the rest. They all reached a similar conclusion; the proposed rule is not likely to have much of an impact when courts are presented with questions involving the classification of workers under the Fair Labor Standards Act (FLSA). 

Corey Swinick

Corey observes that the proposed regulation may affect the DOL’s enforcement activities, but it won’t influence how courts classify workers. Corey writes: 

While the proposed rule would not directly influence how courts determine whether workers are independent contractors or employees, it will impact the DOL’s enforcement activities and the position it takes in litigation.

See The “Gig” is Up: DOL Proposes Rule That Would Classify More Independent Contractors as Employees

Ellen M. Hemminger and Peter Walrod

Ellen and Peter adopt a similar stance. They note that courts may follow the proposed rule if they find it persuasive. In additon, the note that state laws may be more strict. Ellen and Peter write: 

[E]mployers should be aware that the regulation is only interpretive. Courts are not required to follow it, although some may find the DOL’s interpretation persuasive. Of course, employers in states with more protective laws and regulations governing classification of workers must continue to comply with their respective state law tests.

See DOL’s Proposed Independent Contractor Rule Would Classify More Workers as Employees

Allan Bloom

Alllan says that courts will give deference to the proposed rule to the extent that it is persuasive. Allan writes: 

As the DOL concedes, the courts are the ultimate arbiters of whether a particular individual or group of individuals are employees or independent contractors.  In its introductory statement in proposed 29 C.F.R. § 795.100, the DOL describes the proposed rule as containing its “general interpretations” for determining worker status.  If the courts grant the rule the same measure of deference as they do with other “interpretive” rules, the weight they will afford the rule should depend on “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade”—as explained by the Supreme Court in Skidmore v. Swift Co. 

See DOL’s New Independent Contractor Rule: A Return to 2020 | Proskauer – Law and the Workplace – JDSupra

Christopher Braham, David Fuller, Jennifer Hill, Joseph Mulherin, and Madeline Hassell

Christopher, David, Jennifer, Joseph and Madeline say that the proposed rule will make it harder to classify workers as independent contractors in an audit, but the proposed rule will not have much impact on how courts classify workers. They write: 

Additionally, the new rule, if adopted, will make it harder for companies to establish at the audit stage that individuals are independent contractors. It is also reasonable to expect that the current iteration of the DOL will seek to initiate investigations of companies that engage large groups of independent contractors to serve the same business function.

However, the new rule is unlikely to have any significant impact on how courts analyze the question of whether an individual is an employee or an independent contractor. Courts are unlikely to assign significant deference to the DOL’s frequently shifting positions.

See The DOL Has Issued New Proposed Independent Contractor Classification Rules: What Now?

Richard Reibstein

In his article entitled  The Labor Department’s Independent Contractor Rule Has Little if No Legal Impact but Is Likely To Cause Anxiety for Stakeholders Richard Reibstein writes: 

In early January 2021 when the Trump Administration issued its regulation on independent contractor classification, we noted in a January 6, 2021 blog post that “the regulation…would be ‘much ado about (almost) nothing.’”  We remarked that, “unlike most regulations with hard and fast rules, the proposed regulation was in the nature of an administrative interpretation comprising the Labor Department’s review of existing court decisions and its articulation of a preferred legal analysis … [that] courts would give little if any deference to.”  The Biden 2022 Rule is quite similar in that regard.

The courts, not regulatory bodies, have the final say on who qualifies as an independent contractor and who does not.  Regulations are not laws. While courts are expected to give deference to valid regulations, that is not a given where regulations keep changing, especially where courts have already issued an abundance of decisions on a particular subject.

These authors consistently predict that the proposed rule rule will not have a material effect on how courts interpret the Fair Labor Standards Act (FLSA). When you get beyond the noise in the media, the impact of the rule may not be significant. The DOL is already enforcing the FLSA under the current rule and court interpretations and it already considers more workers to be employees than the previous administration. The proposed rule may spell out the DOL’s interpretation of the law and case law, but it will be courts who ultimately decide on the classification of workers and courts will defer to the rule only to the extent that it is persuasive 

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