Labor Department seeks more time to review worker classification rule
February 5, 2021
The U.S. Department of Labor wants additional time to review a final rule regarding worker classification that is slated to go into effect in March.
In September, the Labor Department’s Wage and Hour Division announced its attempt to tackle the controversial topic of worker classification by proposing an “economic reality” test to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.
The proposal advanced to a final rule on Jan. 7 and is set to go into effect on March 8.
Less than two weeks later, when President Joe Biden was inaugurated, he issued a regulatory freeze memo “to give the incoming administration an opportunity to review any regulations that the Trump administration tried to finalize in its final days.”
According to multiple reports, the Labor Department’s worker classification rule was one of the sources of motivation behind the regulatory freeze.
On Friday, Feb. 5, the Labor Department published in the Federal Register a proposal to delay the effective date of the final rule until May 7.
“This action proposes to delay until May 7 the effective date of the rule entitled Independent Contractor Status Under the Fair Labor Standards Act,” the notice stated. “The Wage and Hour Division seeks comments on this proposed delay, which would allow it additional opportunity for review and consideration of the new rule.”
How to comment
Comments regarding the proposed delay will be accepted through Feb. 24. To make a comment, go to the Regulations.gov website and enter Docket No. WHD-2020-0007-1802.
If enacted, the finale rule would use the economic reality test to consider whether a worker is in business independently or is economically dependent on an employer for work.
“The final rule explains that independent contractors are workers who, as a matter of economic reality, are in business for themselves as opposed to being economically dependent on the potential employer for work,” the Labor Department wrote in the final rule notice. “The final rule also explains that the inquiry into economic dependence is conducted by applying several factors, with no one factor being dispositive, and that actual practices are entitled to greater weight than what may be contractually or theoretically possible.”
The worker classification rule isn’t the only example of the Labor Department pivoting since the change in administrations.
One week after issuing an opinion letter about worker classification, the Department of Labor withdrew that letter.
On Tuesday, Jan. 19 – one day before President Joe Biden was inaugurated – the Department of Labor’s Wage and Hour Division issued an opinion letter about whether or not the requiring tractor-trailer truck drivers to implement safety measures required by law constitutes control by the motor carrier for purposes of their status as employees or independent contractors under the Fair Labor Standards Act.
Considered guidance, the Labor Department concluded on Jan. 19 that the safety measures do not constitute control for purposes of determining independent contractor status and that the owner-operators are likely independent contractors.
On Tuesday, Jan. 26, the Labor Department announced that it was withdrawing the opinion letter. The DOL also rescinded two additional opinion letters involving the Fair Labor Standards Act.
“These letters were issued prematurely because they are based on rules that have not gone into effect,” the Wage and Hour Division wrote in a news release. “This withdrawal is an official ruling of the Wage and Hour Division for purposes of the Portal-to-Portal Act, and these letters may not be relied upon as statements of agency policy as of the date of withdrawal.” LL