U.S. Labor Department will withdraw worker classification rule

A Trump administration rule that attempted to tackle worker classification via an “economic reality” test to determine whether a worker is an employee or contractor is being officially withdrawn.

The U.S. Department of Labor announced that it would formally withdraw the rule addressing independent contractor status under the Fair Labor Standards Act, effective May 6.

The move has been expected for months. In March, the Labor Department issued a notice of proposed rulemaking to withdraw the independent contractor rule. It had originally been set to take effect on March 8.

The “economic reality” test proposal was elevated to a final rule on Jan. 7, which was just shy of two weeks before President Joe Biden took office. The new administration first delayed the final rule until May and then announced plans to withdraw it. The public was given 30 days to comment on the proposal to withdraw the rule.

“After reviewing the approximately 1,000 comments submitted in response to the NPRM, the department has decided to finalize the withdrawal of the independent contractor rule,” the agency said. “As explained in the final rule, the department believes that the rule is inconsistent with the FLSA’s text and purpose, and would have a confusing and disruptive effect on workers and businesses alike due to its departure from longstanding judicial precedent.”

OOIDA opposed withdrawing the rule

While admitting that the worker classification rule could use some improvements, the Owner-Operator Independent Drivers Association opposed the Department of Labor’s plan to withdraw the rule. The Association submitted formal comments on the rulemaking last month.

Wednesday’s announcement was “not surprising … but still disappointing,” according to Bryce Mongeon, OOIDA’s director of legislative affairs.

“As we have told them on multiple occasions, there were some improvements that should have been made to the independent contractor rule, but overall the rule would likely have provided some new certainty for owner-operators,” he said.

Mongeon went on to say that he doesn’t expect to see legislation from Congress to help clear up the confusion either.

“Classification is certainly a hot topic in Congress with the PRO Act, although that is extremely unlikely to become law,” he said. “And this rule would certainly be better than misguided efforts to implement the ABC Test, like we’ve seen in California.” LL